Utilitee Market Analysis Report – First Version”

Ref. Ares(2018)5602201 - 31/10/2018

Utility Business Model Transformation through human-centric behavioural interventions and ICT tools for Energy Efficiency

D6.3 UtilitEE Market Report – First Version

Version number: 0.7 Dissemination Level: PU Lead Partner: SOLINTEL Due date: 31/10/2018 Type of deliverable: R STATUS: Final

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 768600

D6.3 UtilitEE Market Report – First Version

Published in the framework of:

UtilitEE - Utility Business Model Transformation through human-centric behavioural interventions and ICT tools for Energy Efficiency

UtilitEE website: www.utilitee.eu

Authors:

Hugo Grasset – Solintel Dimitris Panopoulos – Suite 5 Evangelos Zacharis – Hypertech Eva Muñoz – ETRA I+D

Revision and history chart:

VERSION DATE EDITORS COMMENT Creation of ToC for consolidation of market 0.1 31/08/2018 Solintel analysis and research

Assessment of ToC and contribution on utility 0.2 20/09/2018 Solintel level solutions.

0.3 10/10/2018 Solintel First draft of D6.3

0.3 12/10/2018 Suite 5 Comments and feedback to be addressed

0.4 26/10/2018 Solintel Final version for review

0.5 30/10/2018 Suite 5 Final comments and additions

0.6 31/10/2018 ETRA Review process

0.7 31/10/2018 Hypertech E.C. Submission

Disclaimer:

This document reflects only the author’s views and the Commission is not responsible for any use that may be made of the information contained there

D6.3 UtilitEE Market Report – First Version

Table of content

1 Executive summary ...... 8 2 Objectives of the report ...... 9 2.1 Relation with Other Deliverables ...... 9 2.2 Structure of the Document ...... 10 3 Introduction and Methodological approach ...... 11 4 General Market and Competitive Overview ...... 15 4.1 Utilities market in Europe – Future challenges and requirements for survival ...... 18 4.2 Energy efficiency for buildings in the EU ...... 23 4.2.1 Market Overview Energy Service Companies ...... 23 4.2.2 Integration of ICT, IoT and energy management systems for ESCOs and facility managers...... 30 4.2.3 Market Drivers/Barriers ...... 32 4.2.4 PESTLE Analysis ...... 33 4.3 Demand response market and aggregators in the EU ...... 36 4.3.1 Market overview ...... 36 4.3.2 Market Drivers and Barriers: Optimal market, macroeconomic and environmental configurations ...... 41 4.3.3 PESTLE Analysis ...... 42 4.4 Consolidation of analyses for business model fit ...... 45 4.5 Energy Management Systems and Solutions ...... 51 4.5.1 Smart homes general overview ...... 51 4.5.2 Building energy management systems segment (BEMS) ...... 64 4.5.3 Utility level energy management solutions ...... 72 4.6 Concluding remarks ...... 80 5 Technology evaluation & Competition Analysis ...... 82 5.1 Competitor product analysis (listing and mapping) ...... 82 5.1.1 Sensing and Information Management Layer ...... 82 5.1.2 Enhanced Performance Rating Analytics ...... 83 5.1.3 Home/building automation service providers/ Energy management solutions ...... 83 5.1.4 Utility level energy management platform market place ...... 85 6 Conclusion ...... 100

D6.3 UtilitEE Market Report – First Version

6.1 Summary of achievements ...... 100 6.2 Future needed developments ...... 100 7 References ...... 102 8 Annex ...... 105 8.1 SEDC Grading system: ...... 105 8.2 ESCO market attractiveness rating system ...... 106

D6.3 UtilitEE Market Report – First Version

List of tables

Table 2 UtilitEE business models and High Level Use Cases ...... 16 Table 3 ESCO and EPC regional market data ...... 26 Table 4 EPC characterization ...... 29 Table 5 Detailed country grading of the SEDC 2017 ...... 39 Table 6 ESCO market value and size indicators ...... 46 Table 7 ESCO market scoring ...... 46 Table 8 SEDC Overall rescaled grading ...... 48 Table 9 UMOI grading system ...... 48 Table 10 UMOI Scores ...... 50 Table 11 Summary of communications and network technologies for home area networks [10] ...... 60 Table 12 Porter´s 5 forces analysis HEMS/HAS market...... 63 Table 13 Porter´s 5 forces analysis for the BEMS market ...... 71 Table 14 Porter´s 5 forces analysis Utility Solutions ...... 80 Table 13 Smart home gateway competitors ...... 82 Table 14 Energy Dashboards/eDECS competitors ...... 83 Table 15 BEMS competitors ...... 85 Table 16 HEMS competitors ...... 85 Table 17 Utility level competition analysis ...... 86 Table 18 Demand Response Systems for Utilities ...... 91 Table 19 Behavioural / Customer Engagement comparative analysis ...... 93 Table 20 Vertical vendors comparative analysis ...... 95 Table 21 SWOT analysis for the UtilitEE solution ...... 99 Table 22 DR Access to market grading criteria [7] ...... 105 Table 23 Service Providers access to market grading criteria [7] ...... 105 Table 24 Product Requirements grading criteria [7] ...... 106 Table 25 M&V grading criteria [7] ...... 106 Table 26 Overall grading criteria [7] ...... 106 Table 27 ESCO market size grading scale ...... 107 Table 28 ESCO market value grading system ...... 107 Table 29 Overall ESCO market attractiveness ...... 107

List of Figures

Figure 1 Methodology employed for T6.2 completion ...... 12 Figure 2 UtilitEE target market ...... 15 Figure 3 Decoupling of GDP growth and electricity sales [4] ...... 18 Figure 4 Earnings of the top 20 European utilities (IEA) ...... 19 Figure 5 Energy savings through deployment of available EE technologies by 2020 [5] ...... 21 Figure 6 European energy service company market ...... 24 Figure 7 Energy efficient product and services revenue by product type Europe 25 Figure 8 Traditional Energy Management Approach [16] ...... 31 Figure 9 Smart Building ESCO approach [16] ...... 32

D6.3 UtilitEE Market Report – First Version

Figure 10 PESTLE analysis for ESCO and energy efficiency market ...... 35 Figure 11 Demand Response SEDC [21] ...... 36 Figure 12 Demand Response Potential and Percentage of Peak Load in the EU . 37 Figure 13 Map of Explicit Demand Response development in Europe today ...... 40 Figure 14 PESTLE analysis for DR and Aggregators market in Europe ...... 44 Figure 15 UMOI mapping ...... 49 Figure 16 Smart Home Segments ...... 51 Figure 17 Smart home revenue per segment in Europe ...... 52 Figure 18 Smart homes with smart devices in Europe ...... 53 Figure 19 Smart home penetration rates in Europe ...... 53 Figure 20 HEMS market value estimates ...... 55 Figure 21 Wireless Sensor market [19] ...... 58 Figure 22 Smart Thermostat market [23] ...... 59 Figure 23 Communication Protocols [10] ...... 60 Figure 24 Porter´s Five forces diagram for the HEMS/HAS market ...... 62 Figure 25 Product life cycle stages and characteristics ...... 63 Figure 26 BEMS worldwide market by product segment ...... 65 Figure 27 BEMS worldwide market by region ...... 65 Figure 28 Traditional BEMS Functional Analysis ...... 66 Figure 29 Hardware architecture of BEMS ...... 67 Figure 30 BEMS hardware market per region ...... 69 Figure 31 BEMS Software market volume per region ...... 70 Figure 32 Porter´s five forces diagram for the BEMS market ...... 71 Figure 33 Total Utility CIS, CRM, and Analytics Revenue by Region, World Markets: 2018-2027 [11] ...... 73 Figure 34 Total Utility Analytics Revenue by Region, World Markets, 2016-2025 ...... 74 Figure 35 DRMS Spending by Region, World Markets: 2016-2025 [14] ...... 75 Figure 36 Customer Engagement DSM Spending by Region ...... 78 Figure 37 Porter´s 5 forces diagram Utility Solutions ...... 79

D6.3 UtilitEE Market Report – First Version

Glossary

Acronym Full name Utility Business Model Transformation through human- UtilitEE centric behavioural interventions and ICT tools for Energy Efficiency DSM Demand side Management DR Demand response BEMS Building energy management system EC European commission EU European Union UMOI UtilitEE Market Opportunity Index IoT Internet of things eDECS enhanced display energy certificates ESCOS Energy service companies EPBD Energy performance of buildings directive ICT Information communication technology EPC Energy performance contract DER Distributed energy resources EE Energy efficiency AMI Advanced metering MDMS Meter data management system CIS Customer information system GIS Geographic information system HER Home energy reports CEDSM Customer engagement through DSM HEMS Home Energy Management System DSO Distribution system operators

D6.3 UtilitEE Market Report – First Version

1 Executive summary

This report is the deliverable D6.3 of Task 6.2 of the UtilitEE Project, titled “UtilitEE Market Analysis Report – First Version”. The aim of Work Package 6 is to define the UtilitEE Exploitation strategy and Individual/ Clustered Exploitation Plans as well as performing extensive market intelligence activities to ultimately define the UtilitEE Business Innovation Model (Go-to market strategy) and maximize value creation and market impact of the project results. The market analysis in the present report is the first stage of support to companies planning to exploit the project’s outputs to expand their participation in the smart home and IoT market for Utilities, ESCOs and demand response players.

In particular, this deliverable has been aimed to provide a detailed overview of the dynamics of the utilities, energy efficiency and demand response markets in the EU and understand how UtilitEE positions itself as a viable solution for the future challenges of each sector. The growth and evolution of these markets are the underlying drivers for UtilitEE.

In each of these market analyses, relevant regulatory frameworks, market sizes, trends as well as regional/member state level dynamics are observed. Moreover, considering the UtilitEE project plans on using a dual commercial approach for the full exploitation of project results based on the “Utility as an ESCO” and “Utility as a Demand Response Aggregator” business models, it is important to consolidate and cross reference these market analyses to identify the best regional/geographic fit for such approaches and maximize potential for market uptake.

Moreover, the smart home market and especially the energy management segment will be thoroughly analysed. As the main point of market entry for the UtilitEE project, it is important to get a picture of expected market growth rates, penetration rates of IoT and smart devices amongst European homes and evolutions in the coming years. This will feed into T6.3 and enable the consortium to make realistic estimates in terms of penetration rates of the solution down the line for precise cash flow estimates and financial modelling as well as give an idea of the minimal operational setup that will be required which is highly dependent on the expected demand for the product.

Finally, this document sets the foundations for the technology assessment that will span a majority of the project’s life. This aspect of T6.2 is extremely important as it enables the identification of possible competitive advantages of UtilitEE, provides information on pricing and key differential features within the market and informs the consortium in due time of exogenous technological evolutions that may jeopardize the competitive positioning of UtilitEE. Consequently, this enables the consortium to optimize the market positioning of project results and also establish contingency plans in case of external threats.

D6.3 UtilitEE Market Report – First Version

2 Objectives of the report

The deliverable D6.3 is included in the WP6 (Exploitation and Business Innovation), which sets the objective of defining an exploitation strategy to penetrate the market. Within the framework of this WP, D6.3 inscribes itself within task 6.2 “Market Intelligence Activities” which comes as an intermediate support task meant to feed into task 6.1 and 6.3 which contribute more directly to the compliance with the WP´s milestone “UtilitEE Business Innovation Plan”.

The objectives of this first iteration of the report focus on a particular set of elements within the task description:

 The identification of emerging market trends and threats imposed by political, economic, and social conditions;  The identification of UtilitEE potential competitors, customers, stakeholders;  The identification of Market barriers and drivers;  The description of the most relevant geographical markets for the UtilitEE Project;  Initiation of technology assessment mechanisms. This is the preliminary step towards the detailed market overview that will provide valuable market and industry data to T6.3 and enabling the definition of viable business models on the basis of costs of goods sold and operational expenses, financial and regulatory frameworks in targeted geographic segments and accurate market sizes and growth rates, towards allowing for accurate estimation of: anticipated market shares and revenue streams, cash flows, identification of instruments, funds and ventures etc..

2.1 Relation with Other Deliverables

This document will provide the first results of the market analysis of the UtilitEE project (M12) with the intention of establishing the methodological approach to be adopted during the course of the project and for the next deliverables, as well as establishing the necessary foundations and insights on user and product markets. This deliverable is part of T6.2 which feeds into activities in T6.1 Exploitation Plan and T6.3 Business Innovation Plan. The target markets and users are in line with the ones included in D6.1 (initial version of the exploitation plan) which itself is based on D1.5 for the recognition of exploitable assets and D1.2 for value propositions and business models. This document and its subsequent versions will provide market insights which down the line will feed into deliverables and tasks related to exploitation such as D6.2 in M24 (through competitive landscaping and recognition of competitive advantages) and the business innovation plan such as D6.6 in M36 (through market valuations and market potential and financial indicators).

D6.3 UtilitEE Market Report – First Version

Two more iterations of the market report will be provided throughout the course of the project with D6.4 at M24 and D6.5 at M36. D6.4 will focus on detailed technology evaluation approaches and competitive landscaping in order to identify competitive advantages of UtilitEE which will be important for exploitation and business modelling activities. D6.5 will provide tasks related to business planning and modelling with relevant market and financial KPIs in order to perform sound financial forecasts and cash flow statements in line with realistic penetration rates, costs of goods sold and other operational necessities.

2.2 Structure of the Document

This document contains the following content (starting at chapter 3 which follows this section):

 Chapter 3, an overview of the methodology that will be applied throughout the project in order to complete Task 6.2 and the relevant deliverables.  Chapter 4, an overview of the targeted service markets and product markets.  Chapter 5, a preliminary overview of available competing products and services.  Chapter 6, concluding remarks on the document and the necessary next steps.

D6.3 UtilitEE Market Report – First Version

3 Introduction and Methodological approach

As indicated by the Grant Agreement (GA) and description of work, three market reports resulting from the work produced in Task 6.2 related to market intelligence activities will be produced during the course of the UtilitEE project all meant to provide inputs and direction to the exploitation activities in Task 6.1 as well as the Business Innovation Plan in Task 6.3. The main objectives of Task 6.2 are described as follows:

• The prompt identification of emerging market trends and threats imposed by political, economic and social conditions that could jeopardize the commercial potential of UtilitEE results. • Continuous monitoring of the competition and technological advancements, so as to promptly identify new competitors to UtilitEE products and solutions (launched prior to the finalization of the project), with identical or similar features and value. This will give feedback to all previous technical WPs and will trigger mechanisms for properly updating UtilitEE specifications towards ensuring its clear differentiation and competitive advantages against competition. • Providing valuable market and industry data to T6.3 which will enable the definition of viable business models on the basis of: (i) realistic estimations of costs of goods sold and operational expenses, (ii) financial and regulatory frameworks (e.g. taxation and investment friendliness) in targeted geographic segments and (iii) accurate market sizes and growth rates, towards allowing for accurate estimations of: (i) anticipated market shares and revenue streams, (ii) cash flows and profitability and (iii) overall investment needs and the identification of instruments, funds and ventures that could ensure smooth operations and successful business development

The methodology that is to be deployed for the completion of task 6.2 and the three deliverables associated to the latter is dependent on the preceding objectives. The figure below illustrates the 3-phase process that is to be followed.

D6.3 UtilitEE Market Report – First Version

STEP 3 D6.5

Provision of inputs and STEP 2 D6.4 insight for estimations in financial modelling, financial KPIs and Detailed technology and necessities in launching UtilitEE Solutions. STEP 1 D6.3 competitor evaluation: - Precise competitor product and technology Identification of general mapping according to market dynamics: identified key features - Market size - Pricing studies - growth rates Preliminary provision of - Market openess relevant data and figures for the completion of - Competitive assessments relevant financial modeling in D6.5 Preliminary competitor/technology evaluation: - product/tech mapping and listings

Figure 1 Methodology employed for T6.2 completion

Step 1: Identification of general market dynamics – Preliminary competitor/technology evaluation

In the first version of the deliverable, focus is brought towards understanding general dynamics in which the envisioned products will compete in terms of market size, growth rates and access at a regional level. Aligned with the business models for the UtilitEE solution established in the findings of deliverable 1.2 (mainly energy service type approaches with demand side management [DSM] and aggregation), the state of the `ESCO/energy efficiency for buildings´ and the `demand response/aggregation´ markets will be analysed at a regional- country specific level in order to gain insight on optimal business model fit (ESCO type / DSM type or both at the same time) for the UtilitEE product/service in different EU member states.

Currently the DSM market is at an early stage and not applicable throughout Europe requiring the consortium to identify required regional focuses in terms of value propositions and business models for diffusing the UtilitEE solution. Moreover, this process will give an idea on the geographic markets with the highest commercial potential for UtilitEE results. Considering that these two sectors represent the underlying markets for the UtilitEE in terms of potential users and targeted stakeholders for the project results, PESTLE analyses will be offered in order to understand the different political social, economic, technological, legal and environmental factors that will affect the growth of these segments in the coming years.

D6.3 UtilitEE Market Report – First Version

Moreover, general market information is also provided in this report in terms of relevant product markets; namely the smart home and building markets (IoT, Energy Management Systems and platforms) and its many layers (data sensing, analytics and management) as well as relevant solutions for utilities in the DR and IoT space.

UtilitEE tangible assets as defined in D6.1 entering the realm of IoT smart homes/building markets solutions and systems:

 Sensing and Data Management Layer  Behavioural profiling & flexibility model engine  Enhanced performance rating analytics  Benchmark and energy waste determination engine  Behavioural based recommendation engine  Enriched visualization app  Energy monitoring & control app  Business dashboard for Portfolio Management

In this section, Porter´s 5 forces analyses are provided since these markets correspond to the specific points of market entry and penetration for UtilitEE products and services and therefore means that understanding competitive dynamics is important for the creation of pertinent and well-crafted business plans.

Finally, we are going to include a section on technology evaluation which is essentially a detailed analysis of the competitor products for the main components and features offered by UtilitEE. This deliverable provides initial competitor and product mapping and listings in the relevant product markets for the UtilitEE project as well as general market sizes. Nevertheless, the competitor mapping will be an integral step in step 2 of our methodology with more details being brought.

Step 2: Detailed technology and competitor evaluation

In the next phase of task 6.2 embodied in the upcoming D6.4 Second version of the Market Analysis Report, focus will be brought mainly on activities related to the continuous monitoring of competition and technological advancements, more precise features mapping and pricing studies. This can be performed on products at mid-high to high level TRLs of 7-9 in order to reflect best the status quo of the market as well as the direction it will take in the coming years. All findings in this section must be communicated to the consortium efficiently in order to adapt research effort, technologies, innovations and results if important threats are identified.

Step 2 will also explore key market figures, industry data and other syndicated sources of information which will contribute towards the definition of relevant financial KPIs in step 3.

D6.3 UtilitEE Market Report – First Version

Step 3: Provision of inputs and insight for estimations

Envisioned activities for the final step of the task related to market intelligence are mainly pertinent to the third and final objective described in T6.2 in relation to providing inputs for effective financial forecasting of the consolidated UtilitEE project solution when launched to market.

This overall methodology has been designed in order to contribute to the respective tasks contained in work package 6 at different strategic time intervals. The first phase of observations and analysis synthesized in Deliverable 6.3 here present will support T6.1 and exploitation related activities by bringing additional insight on target markets and relevant stakeholders as well as competing products and services. Step 2 contributes towards the exploitation strategy and T6.1 by performing a more profound technology and competitive assessment enabling a potential realignment of exploitable results while preliminary observations and gathered KPIs for financial forecasting and modelling will contribute to Deliverable 6.5 in step 3 which will serve as a direct input to Task 6.3 related to the creation of an actual business plan down the line.

D6.3 UtilitEE Market Report – First Version

4 General Market and Competitive Overview

In order to identify emerging market trends that will affect the competitive positioning of UtilitEE, the following sections provide details and observations on the main relevant markets of the systems and services that will be used and developed in the UtilitEE final solution so that the developed solution is aligned and adapted to market requirements.

UtilitEE aims to exploit smart metering, sensor and data and information management technologies in order to create a behavioral change framework based on the disaggregation of energy use per appliance and user with the creation of Energy Behavioral Profiles.

As established in D6.1, the following markets and users are to be targeted by the consortium:

Figure 2 UtilitEE target market

As observed in the above figure, the main markets to be targeted, whether in B2C or B2B, channels pertain to ESCOs and energy efficiency in buildings services (facility management & ESCOs, building energy management services), the demand response/demand side management sector (DSM Aggregators) and the smart home/building energy management systems market (smart building hardware industry, smart building data analysis) as well as the sector for utility tools and dashboards for portfolio monitoring and management (energy retailers

D6.3 UtilitEE Market Report – First Version

& utilities). Therefore, the next sections will be dedicated towards a thorough analysis of the state of each of these industries.

Moreover, the central objective of UtilitEE is providing utilities with an ICT based solution that can diversify their revenue streams and explore novel business models to address the challenges detailed in the previous section. This makes energy retailer and utilities one of the most important target markets enumerated in the figure above.

In the case of this project, six main business models for energy utilities were envisioned:

Business model Business scenario Supply-demand/ Imbalance Management Aggregator Auto energy efficiency audits ESCO Comfort preserving energy efficiency ESCO DSO cost minimization Aggregator Community VPPs Aggregator Dynamic retailer pricing schemas Aggregator Table 1 UtilitEE business models and High Level Use Cases

Through our planned analysis of the ESCO and building energy efficiency markets as well as the DSM sector with a regional focus we cover the preliminary observations necessary for gaining crucial regional market insights. Another section will also be produced where we cross reference the obtained market information to gain insight on Member States where a combination of both business models can be envisioned representing the highest possible market potential and opportunity levels for the UtilitEE project. The finality of this process will be the ability to produce a map with this information.

In order to perform these tasks, the competitive overview will:

(i) Make macro level observations on the utilities market. (ii) Provide an analysis of the energy efficiency sector especially from the point of view of ESCOs which offer competing business models to the ones that the UtilitEE consortium has envisioned for the repositioning of European energy retailers. (iii) Provide an analysis of the demand response and aggregators market which is another envisioned value proposition for the consolidated UtilitEE product down the line. (iv) Cross reference information on both the building energy efficiency sector and the DSM sector at a regional level in order to assess potential business model fit for different member states. (v) Provide an analysis of the smart homes/Building energy management systems (BEMS)/ ICT-IoT solutions markets as well as existing solutions for utilities especially in terms of demand side

D6.3 UtilitEE Market Report – First Version

management/response (DSM) as well as observations on utility analytics

Relevant market and competitive assessment tools such as PESTLE analyses for the foundational ESCO and DR markets as well as Porter´s 5 forces for our direct entry product markets (smart home energy management systems, BEMS, utility solutions) will be applied in order to get a full picture.

D6.3 UtilitEE Market Report – First Version

4.1 Utilities market in Europe – Future challenges and requirements for survival

In order to assess the potential and future of the UtilitEE project results, it is necessary to make quick macro level observations on the current state of the energy utilities market as well as the challenges that the market faces and that UtilitEE aims to tackle.

Currently, the energy utilities market is at an inflection point as reflected by the comparison of different macroeconomic and industry specific KPIs which show a clear decoupling between economic growth and growth in energy generation as had been the case for so many decades in the past.

Net electricity generation and GDP per capita, EU-28 3,400 30,000

3,200

25,000

3,000

20,000

2,800 15,000

2,600 million million GWh 10,000

2,400 /capita(current prices) €

5,000 2,200

2,000 0

2009 2014 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012 2013 2015 2016

Net generation GDP Current prices, euro per capita

Figure 3 Decoupling of GDP growth and electricity sales [4]

From 1995 until the financial crisis in 2008, the EU energy utilities sector was characterized by a period of growth and high profitability driven by increasing demand across Europe coupled with increasing commodity prices and GDP. Together, these trends led to very high wholesale prices across most major European markets between 2005 and 2008 benefitting utility companies as reflected in the share prices of the main European players during that period [2].

Nevertheless, the 2008 crisis revealed that these same market forces had resulted in a situation of excess capacity in the sector and drove prices down, leading to a significant decline in revenue and profitability for incumbent utilities.

Consequently, between 2008 and 2014 the EU’s 5 largest publicly traded energy utilities have dipped by 37% of their value accounting for €100 billion while, on

D6.3 UtilitEE Market Report – First Version average, market capitalization for the sector as a whole in the EU lost almost half of its value, destroying around EUR 500 billion of shareholder value. As a comparison to this, Germany’s stock market increased 18% over the same period [1].

This post crisis period served as an indication to the extended difficult times ahead until today for the utilities market. As the sector was affected by oversupply and need for infrastructure rationalization, regulations and policies to comply with the EU´s targets in terms of energy efficiency, renewable integration and emissions put additional pressure on the market. Instruments and legislative tools have been applied, for instance in the form of subsidies for effective energy use or penalties when reduction goals are not met, bringing about price distortions and calling into question the traditional revenue-based business models and market structures of the past whereby the objective used to be to sell as many kilowatt-hours as possible at the lowest cost possible. The following figure is a reflection of these phenomena with prolonged dips in earnings for Europe´s utility sector.

Figure 4 Earnings of the top 20 European utilities (IEA)

As has been discussed in D1.2 on Utility-driven Business Models, the EU set about its climate and energy program and targets in June 2009 with a set of demanding climate and energy targets to be met by 2020. This is known as the “20-20-20” program whereby reduction in EU greenhouse gas emissions of at least 20%, 20% of renewable energy in the EU final energy consumption and 20% reduction in primary energy through energy efficiency implements are to be achieved. Whilst the 2 first objectives have resulted in binding legislation; the third one concerning energy efficiency implements is characterized by uncertainty as to how the goals are to be met for the EU.

D6.3 UtilitEE Market Report – First Version

The European Commission (EC) created the 2012 European Union Energy Efficiency Directive and the 2016 updated directive as a framework approach to work towards the target of 20% primary energy savings by 2020 and a new 30% energy efficiency target for 2030. Some of the most relevant specific binding measures and policies are the following (new national measures must ensure major energy savings for consumers and industry alike):

 energy distributors or retail energy sales companies have to achieve 1.5% energy savings per year through the implementation of energy efficiency measures  EU countries can opt to achieve the same level of savings through other means, such as improving the efficiency of heating systems, installing double glazed windows or insulating roofs  the public sector in EU countries should purchase energy efficient buildings, products and services  every year, governments in EU countries must carry out energy efficient renovations on at least 3% (by floor area) of the buildings they own and occupy  Energy consumers should be empowered to better manage consumption. This includes easy and free access to data on consumption through individual metering  national incentives for SMEs to undergo energy audits  large companies will make audits of their energy consumption to help them identify ways to reduce it  Monitoring efficiency levels in new energy generation capacities.

Energy utilities will be especially affected by these measures facing the objective of 1.5% of energy savings per year accountable to energy efficiency implements. In order to reach these objectives, Member States are required to implement national obligation schemes with savings targets and penalties. The outcome of this is to have tradable white certificate schemes at a national level as can be seen in markets such as France, Italy and Germany. Quotas establishing required percentage of electricity to be saved from a baseline are set at the government level and utilities prove that a certain amount of electricity (kWh) has been saved by means of white certificates to demonstrate compliance. Certificates can be obtained either through the implementation of energy conservation measures, the purchase of certificates bilaterally from another company that implemented energy conservation measures, or the purchase of white certificates from a third party [3].

These white certificates are essentially an indirect framework for subsidizing and penalizing utilities on whether or not they have reached their target levels. As a result, energy utilities are faced with cost distortions impeding them to compete on price and calling into question the present validity of traditional revenue- based business models and market structures of the past whereby the objective used to be maximizing sales of kilowatt-hours at the lowest cost possible.

D6.3 UtilitEE Market Report – First Version

Moreover, the implementation and diffusion of energy efficiency technologies in other sectors will also affect utility bottom lines. Stagnant or decreasing demand levels will be observed due to the effects of energy efficiency objectives in other sectors contained within the directive such as the building industry.

Figure 5 Energy savings through deployment of available EE technologies by 2020 [5]

Indeed, according to a study performed by McKinsey, homes could consume as much as 90% less energy by 2020 if the full portfolio of available energy efficiency implements is to be deployed (see figure 2 above)[5].

As a result of this, the utilities market must reinvent itself and diversify its activities and revenue streams if they are to survive the above described market transformations. The challenge for utilities is to make these obligations an

D6.3 UtilitEE Market Report – First Version opportunity for business development rather than a new set of constraints. Although energy savings means diminished revenues in direct energy supply utilities can survive the storm through a combination of:

 Investment in EE measures to avoid penalties implied by TWC programs or other national programs as well as divestments and deleveraging programs and capacity removal of fossil energy.  Internal re-structuring to face the new paradigm shift (investment in new skills and departments)  Target new growth areas with a deep transformation of current business models related to EE: The integration of new ICT tools enabling the creation of new downstream products and services related to energy efficiency.

The UtilitEE project brings particular focus on the third challenge of this list. Indeed, energy efficiency provides opportunities for utilities to develop new business models related to activities such as smart metering, smart home appliances, and consumer-friendly bills, among others. Through the use of ICT and IoT based solutions, utilities have the power to transform their end users into pro-active consumers and monetize this behavioral change both benefitting themselves, the consumer and the EU as a whole through higher efficiency levels.

D6.3 UtilitEE Market Report – First Version

4.2 Energy efficiency for buildings in the EU

In order to perform a detailed and pertinent overview of the energy efficiency market dynamics that will affect the UtilitEE project results and outcomes, it has been decided to separate the market and sector observations and analysis into three different components. The first one will provide an overview of the ESCO market in Europe as of now in order to later evaluate which regions are most prone to experiencing the highest levels of market uptake and acceptance for the Utility as an ESCO business model brought forward by the UtilitEE project. The second section will explore the integration of ICT and IoT based technologies and services for ESCOs and facility managers and the impacts these can have on their approach to business. The last two sections will consolidate the obtained information into a set of identified market barriers and drivers to which UtilitEE will have to pay attention, as well as a PESTLE analysis which summarizes key factors having a clear influence on the ESCO and EE for buildings sectors.

4.2.1 Market Overview Energy Service Companies

It is mentioned that UtilitEE project results can possibly be exploited within the framework of a Utility as an ESCO business model. Moreover, within the first version of the exploitation plan, the ESCO market is mentioned as a possible B2C target for selling the UtilitEE product in parallel with utilities being that these stakeholders are more familiar and experienced in EPC markets and business approaches. Therefore, it is important for the UtilitEE consortium to be advised on the largest and most dynamic regional markets.

This report shall provide detail in terms of the underlying specificities of the ESCO market within each relevant region for potential exploitation of project outcomes.

Generally, the ESCO sector in the European Union has been rising in most markets over the last decades at a steady pace and is set to follow this path until 2024 according to Navigant research. The following figure illustrates the estimated evolution of revenues in the sector for Europe over the 2016-2024 period. This graph only takes into consideration service provisions and not EE materials and products.

D6.3 UtilitEE Market Report – First Version

European energy service company market 3.20

3.10

3.00

2.90

2.80

2.70 Billions Billions USD

2.60

2.50

2.40 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Figure 6 European energy service company market

It is predicted that by 2024 the European ESCO market will be valued at over 3.14 billion USD with a CAGR of 1.7%. The ESCO market growth is expected to be driven by demand for capital to overcome the challenges of deferred maintenance, mounting regulatory and policy pressures as described by the regulatory drivers earlier in this section, and growing interest in more comprehensive energy management strategies [7].

In terms of actual investments in energy efficient products for buildings, the important growth rates in all product and service categories also tend to demonstrate that the ESCO market will be flourishing in Europe during the next few years as a result of policies, EU goals and increased awareness levels. Navigant research predicts that cumulative spending energy efficient buildings in Europe will total almost 800 billion USD between 2014 and 2023 and reach an annual total of 109 billion USD in the last year accounting for a CAGR of 7.68% over the forecast period [12].

D6.3 UtilitEE Market Report – First Version

Figure 7 Energy efficient product and services revenue by product type Europe

According to Navigant, energy management technologies, water heating and efficiency, and services and commissioning segments will experience the highest rates of growth over the period. The most pertinent segment to the UtilitEE project is that of Energy Management Technologies and control systems.

As a whole, the European energy efficient buildings market is led by France, Germany, and the United Kingdom — the three largest countries in terms of building stock, and countries that consistently show strong policy support as well as companies with product and service innovation.

According to “The European ESCO market Report 2013” and its 2017 update [20], ESCO markets vary deeply among the Member States in terms of development, size, features and frameworks. The table below presents some of these regional disparities with the number of ESCO companies in EU Member States in 2010, 2013 and 2015-2016. The values are robust but rarely comparable – in terms of the number of ESCOs, differences are due to the varying definition of these companies in the given context, while in the case of the market sizes, sources include different parts of the value chain and/or calculate or estimate these in a variety of ways including unrealized market potential at times explaining the differences observed in market valuations given in figure 6 previously. However, these values can be useful for understanding the volume of relevant markets, identifying the regions with most potential customers and can be a starting point for a deeper country by country analysis within further deliverables as they give useful insights into the current status of ESCO industry and market in Europe. Looking at the dynamics of the growth of ESCOs in different countries we can identify markets with the greatest potential.

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Number of Number of ESCOs Market EPC providers Market value value in EPC maket value EPC Market Potential in 2013 2015- only 2015-2016 Country 2010 2013 2015-2016 2015-2016 2016 over over €12billion/yr. (rough Austria 40 15-20 €15-20 million n/a >€10million/yr. 50 50 estimate from 2010) 10- 10- €500,000-few Belgium 10-15 7 €5 million n/a €1million/yr. 15 15 billion/yr. €500-900 million Bulgaria few 7-12 15 12-15 €33 million €33 million n/a (Potential of ESCO market)

Croatia 2 10 10-15 5 interested €10 million n/a n/a €100 million

Cyprus n/a n/a 19 n/a n/a n/a n/a n/a

Czech €10 -20 8-10 20 n/a 8-10 €10 -20 million n/a €100-500 million Republic million

Nearly the size of 15- 6-10 (well € 140 - 150 € 140 - Denmark 10 6-10 the ESCO market €1-7 billion 20 developed) million 150 million /€140 - 150 million Current ESCO´s Estonia 2 2(3?) 2-3 have possibility n.a n.a n.a €100 million for EPCs

Finland 8 5-8 5-8 5-7 €10 million n.a €5,3 million €100-200 million

€75-100 million for EPC, €2,6-3,2 France 100 350 Over 300 10 €150-200 million €250-500 million/yr. €3.2b/year for billion all

€3-4 billion, of 250- 500- €3,5-5 Germany Over 500 10 which €150 150 million €20-30 billion/yr. 500 550 billion million is EPC

Greece 2 5 47 registered 1 n/a n/a n/a €5 million

Hungary 30 10 7-10 4 n/a n/a n/a n/a

Ireland 15 ca.30 10 just starting n/a n/a n/a €1 billion

20 of them can €7,5-100 billion 100- 50- offer EPC´s/ 45 (extremely wide range Italy 100 € 500 million €1 billion €300 million 150 100 of them actually due to uncertainties in have what is included) €2-3 million €5-10 €5-10 million (ESC is Latvia 5 8 50-60 6-8 /year by one of €8 billion million not common) the 7 ESCOs

Lithuania 6 3-5 6 4-5 n/a n/a >€3 million n/a

Luxemburg 3-4 3-6 4-5 non existant n/a n/a 0 €5,1-6,2 billion

Malta n/a n/a n/a n/a n/a n/a n/a n/a

Netherlands 50 50 100 25 n/a n/a n/a n/a

€10-25 million 30- Poland 3-10 n/a n/a (2011 - annual n/a n/a €25-75 million 50 turnover) 10 ESCOs representing €10-30 10- more than €10-30 million Portugal 100 n/a million n/a n/a 12 70% of the (2010) (2010) business performed

15- ca. 50 million €3-5 Romania 14 n/a Below 10 n/a €780 million/yr. 20 (2010) million

20-50 Slovakia 5 6-8 registered (8 12-20 n/a €60 million €5 million €20 million/yr. with projects)

20- €300 - 400 Spain 15 968 registered 20-30 n/a n/a n/a 60 million

Slight decrease with Sweden 8 n/a impossibility to 4-5 €60-80 n/a n/a €100-400 million give precise number

United 30- €400 €1,8 billion over next 4 20 Over 50 25 n/a €100 million Kingdom 50 million years Table 2 ESCO and EPC regional market data

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The European Commission´s Joint Research Center report “Energy Services Companies in the EU sets special focus on Energy Performance Contracts (EPC) in their regional market assessments. Energy performance contracts refer to a contractual agreement where the costs of implementing energy efficient technologies, systems and processes in buildings are covered by the guaranteed savings that result from the latter. EPCs are seen as a potential driver for increasing private investor interest in energy efficiency investments. Covering the initial capital involved in energy efficiency upgrades through an EPC can either go through the ESCO implementing the changes itself or a third-party private institution such as a bank. The following table coming from the Technical Guidance report on “Financing the energy renovation of buildings with cohesion policy funding” from 2014 lists the different types of EPCs and their disadvantages and advantages.

EPC type Energy performance contracting Energy performance with ESCO finance contracting with owner/third party financing Description EPC is an arrangement in which a In the case of EPC with owner contracting partner enters into an finance, the contractual integrated contract with the end‐user arrangement between the and the financing institution to design ESCO and the building owner and implement energy conservation regarding sustainable energy measures with a guaranteed level of measure implementation and energy performance for the duration guaranteed energy of the contract. The stream of income performance levels can be the from energy savings yielded from the same as for EPC with ESCO measures is used to repay the upfront finance. The difference is that investment costs, and payment is the building owner provides based on the achievement of EE the money required for the improvements and on meeting other investment (from their own agreed performance criteria. An EPC funds or a loan provided by a can be arranged with the ESCO bank). In this context, borrowing from banks or investors in Cohesion Policy funding can order to finance the investment. In provide preferential loans to such a case, in order to reduce its building owners or balance sheet debt, the ESCO may guarantees. sell future payment streams to a bank in a process called forfeiting. Cohesion Policy funding in an EPC can provide preferential loans to ESCOs, guarantees or equity as a tool to encourage end‐user participation, access to finance and ensure achievement of energy savings. Advantages • Guarantees a certain level of energy Generates most of the savings and shields the client from advantages of an EPC with any performance risk. ESCO financing, including: • End‐user experiences guaranteed • Guarantees a certain level of project cost, energy and financial energy savings and shields the savings, and equipment performance. client from any performance • The ESCO has expert knowledge of risk. technical requirements, permit • End‐user experiences legislation and support schemes. guaranteed project cost,

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• In EPC with ESCO finance, the loan energy and financial savings, can remain off balance sheet for the and equipment performance. building owner and be on balance • The ESCO has expert sheet for the ESCO knowledge of technical • Allows organizations to disconnect requirements, permit project debt from the building owner. legislation and support • SE measures improve working and schemes. Key difference is living conditions and increase value of that the building owner retains the building. a larger share of the savings • Annual energy savings can be realised; the building owner measured and verified according to can also take over some of the the International Performance functions that the ESCO might Measurement& Verification Protocol have performed including (IPMVP). ordinary operation • The ESCO represents a single point management or fault of accountability, simplifying the clearance. The EPC package upgrade process significantly. can be tailored to the needs • Enables facility upgrades to be paid and experience of the building for immediately, bringing forward owner. Also, when the building future energy, carbon and operational owner has a high credit‐rating savings. (e.g. a municipality) and the • Low interest financing options are possibility to take on more often available, including tax‐free debt, they may be in a municipal leases. position to get lower interest rates than an ESCO. Disadvantages • Complex arrangement‐establishing • Building technology an EPC is time‐consuming and measures can be mostly requires (external) expertise since refinanced from future energy each project needs to be assessed cost savings within a project individually to estimate potential period of 10 years. However, savings. this is not possible for building • After contract is signed the facility construction measures, such owner is tied to one vendor for the as building envelope term of the contract. insulation. Consequently, the • ESCOs tend to focus on “low‐ building owner will be required hanging fruit” options that have to make any significant shorter paybacks and a lower risk upfront investments. exposure. However, properly • When the building owner modelled FIs can de‐risk the EPC and finances a SE project with a motivate ESCOs to take longer‐term loan, the loan is capitalized on engagements, going closer to deep the owner’s balance sheet renovation. This is particularly which then reduces its ability interesting in the public sector. to obtain credit for other • Measurement and Verification projects. (M&V): while the contract is running, the results (energy saved) need to be continuously monitored. • Any failure or shortfall from the expected result requires reconciliation to recover shortfall. • EPCs only concern an agreement on savings, not on the measures to be implemented.

D6.3 UtilitEE Market Report – First Version

Table 3 EPC characterization1

The UtilitEE project is likely to benefit from, as well as foster, the use of EPC´s as they not only constitute an effective financial incentive which the project can rely on for promulgating their technological developments and project results but also represent a direct market opportunity as the disadvantages implied by EPCs can be mitigated through some of the KERs of the project. Indeed, UtilitEE can be marketed towards ESCOs wanting to hedge themselves over performance gap risks and variable energy cost risks by acting upon the behavioral elements of their clients fostering savings beyond the baseline guaranteed by the new buildings systems and materials put in place. Indeed, as stated in the previous table one of the main drawbacks of EPC´s is the need for reconciliation in order to recover shortfalls in energy performance.

Based on the table 1 above, the growth of ESCO markets in terms of number of actors has grown in Bulgaria, Croatia, Cyprus, Greece, Italy, Latvia, Lithuania, the Netherlands, Slovakia, Spain and the United Kingdom. On the other hand, Germany, Italy, Latvia, Slovakia and the United Kingdom have experienced increases in actual market size. In terms of the countries with the most ESCOs, France and Germany are still heading the list with the addition of Spain, the Netherlands and Italy in the 2017 report as major markets. The most important market sizes are Germany, France, Italy, Spain and the United Kingdom. Moreover, the markets with the most promising perspectives for growth according to EPC market potential are Austria, Belgium, Germany, Ireland, Italy, Latvia, Luxembourg and the United Kingdom. The largest market sizes for EPCs currently are found in Austria, Denmark, France, Germany, Italy and the United Kingdom. When looking at the actual share of EPC contracts over the geographic market sizes, it is possible to note many disparities in the diffusion and application of these contracts and financial mechanisms within different ESCO markets. The markets where EPC´s are the most prevalent way of performing renovations are Austria, Denmark, Estonia and Latvia. Within these countries, more than half of the ESCO market size is accounted by EPCs. Finally, the member states with the most EPC providers are Austria, Bulgaria, France, Germany, Italy, The Netherlands, Slovakia, Spain and the United Kingdom.

To summarize, Germany, France, Italy, the United Kingdom and Spain are countries with the highest number of ESCO companies, EPC providers and market size. These countries could be considered as preferable target markets for UtilitEE future commercialization.

1 Financing the energy renovation of buildings with cohesion policy funding. European Commission. [Online] https://ec.europa.eu/energy/sites/ener/files/documents/2014_guidance_energy_renovation_buildings.pdf

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4.2.2 Integration of ICT, IoT and energy management systems for ESCOs and facility managers

In order for Europe to hold on to the tremendous gains it has already made in the ESCO and EE buildings sector, important investments will need to happen in building technologies which are evolving toward an integrated ecosystem of components and sensors that work together as a platform for optimizing facility operations.

Indeed, systems for connected homes and buildings are gaining popularity by enabling increased comfort, energy savings through energy management, and home security services. ESCOs are considered to be pivotal actors in the initial diffusion of home energy management systems (HEM)/BEM and IoT technologies bundled with services and are likely to gain the highest levels of market share initially. Indeed, many value creating opportunities can be found in the application of IoT and cloud based technologies for ESCOS around Europe. Considering EPC business models, ESCOS and facility managers both benefit from the implementation of ICT based measurement and validation mechanisms for savings calculations, energy drifts and performance gaps which might hinder the initially calculated baseline savings. Moreover, the use of an energy management system means clients can visualize their consumption and get timely, data-driven updates which over time creates a report of trust between them and the ESCO whether they be facility managers or individual home owners. Furthermore, offering energy management services will favor longer term rapports and interactions with customers and lengthening revenue potential. The traditional energy management approach is characterized by sporadic refurbishment interventions and contracts as depicted by the following figure create by Navigant research.

D6.3 UtilitEE Market Report – First Version

Figure 8 Traditional Energy Management Approach [16]

The benefits of smart home and building integration within ESCO activities and facility management would be the establishment of a more prolonged and continuous commercial interaction benefitting both parties. Energy consumption drifts, performance gaps and maintenance needs would be better managed benefitting Facility Managers while ESCOS would benefit from more stable and regular cash flows, deeper understanding of effective initiatives and approaches for EE in buildings and the creation of new value propositions and alliances with utilities for instance. The following figure from Navigant research depicts this more cyclical model.

D6.3 UtilitEE Market Report – First Version

Figure 9 Smart Building ESCO approach [16]

As the market matures, HEM services are likely to grow in relative importance by offsetting the investment in connected home services with lower cost for electricity. Large propagation of HEM services and a general growth of the connected home market is the prime focus for any ESCO. In order to grow successfully within this market segment, ESCOs will need to engage with many energy retailers and DSOs, and swiftly integrate new devices and services. In this respect, the UtilitEE product and service suite could potentially be used as a bridge between both of these stakeholder categories [6].

4.2.3 Market Drivers/Barriers

The following section provides an account on the major drivers and barriers within the ESCO and energy efficient buildings sector in the EU.

Drivers of ESCO market development:

 Active framework and positive impact of the EU level legislation and programs (see chapter Regulatory framework in Europe).  The markets are becoming demand driven.  Increasing number of policies which acknowledge and support the ESCO solution (White Certificates).  Facilitators gain importance in selected countries as an effective means to mediate between client and suppliers.  Dissemination of information for potential clients, financial market.  Demonstrative sites/projects that rise awareness about ESCOs (FP7, H2020 etc.).  Energy price increase.

D6.3 UtilitEE Market Report – First Version

 Removal of regulatory barriers was pursued in several ESCO markets. In Spain public procurement rules are adapted to long term (such as ESCO) contracts as a result of the modified procurement law (Law 30/2007, modified in Legislative Decree 3/2011).  Increased interest in the provision of energy services to achieve energy and environmental goals.

Barriers of ESCO market development:

 Low awareness of and lack of information about the ESCO concept.  Mistrust from the clients.  High perceived technical and business risks.  Lack of accepted standardized measurement and verification procedures.  Administrative hurdles and consequently high transaction costs.  Principal/agent dilemma with split incentives in the housing sector.  Aversion to outsource energy.  Lack of appropriate forms of finance; low awareness and motivation of banks.  Low priority of energy efficiency measures.  European and national funds for renovation of buildings (especially when they are non-refundable) easily available and known among building owners hinder the use of ESCO co-financing – no need to use other forms of financing such as ESCO.

It must be noted that activities taken up by EU Member States when adapting to EU regulation constantly results in minimizing the barriers mentioned above. Especially those related to lack of awareness about ESCO financing or legal and technical barriers that hinder ESCO development.

4.2.4 PESTLE Analysis

The early identification of the different political, economic, social, technological, environmental, and legal aspects is a crucial component of the methodology established within the UtilitEE market report and will allow the identification of crucial factors that will influence the way in which results are exploited.

To this end a PESTLE analysis of the ESCO and buildings/homes energy efficiency market environments in Europe is provided in the following section.

Political factors: Economic factors: • EU plan on climate change and • Low interest rates/ debt cost of 20 20 20 targets (+) capital in EU. (+) • European Green Building • Booming VC investments in Directive (+) green technologies. (+) • EPBD framework is a major • Uptake of EPC around the EU. driving force of the ESCO (+) industry with standards and • Energy price volatility and objectives being set for building deregulation of energy markets.

D6.3 UtilitEE Market Report – First Version

renovations and (+) refurbishments. (+) • Lack of financing options are • Energy Efficiency Directive still prevalent (-) supporting the public sector to • Limited involvement of third use ESCO services; identify and parties and banks to provide publicise points of contact, loans in energy performance where final customers can contracts. (-) receive help; remove regulatory • High risk perception and and non-regulatory barriers discount rates leads to long amoongst other provisions. (+) payback periods and ROIs (-) • Support programs for the development of relevant energy efficiency and green building technologies (H2020...) (+)

Social factors: Technological factors: • General perception by home • Technologies enabling the owners that EeB investments reduction of performance gaps and green building design are for more reliable refurbishment costly. (-) and energy savings predictions • Reluctance of end users to have fostering the diffusion and behavioural data tracked and adoption of EPCs. (+) stored (-) • Considerable R&D efforts are • General trend and growing focused on energy efficient importance of green energy technologies for buildings and efficient products and initiatives homes. (+) gaining traction in society. (+) • Technologies with reduced • Increasing knowledge and intervention times/ quick awareness levels in relation to implementation potential. (+) sustainable buildings and houses. (+) • A lot of homes tend to focus on short term costs rather than long term financial gain of refurbishments or EE initiatives. (-) • Conflicts between tenants and owners lead to uncertainties in who should finance initiatives due to imbalanced incentives. (- )

Legal factors: Environmental factors: • Differing norms, regulations and • Preoccupation for GHG standards across countries can emissions and climate change lead to difficulties for ESCOS to (COP21...). (+) operate transnationally as well • Targeted environmental KPIs as technology providers to and objectives shared in the EU. streamline portfolios. (+) (+) • Country level regulations in • Threshold levels of renewables compliance with EPBD. Updated and VPP integration. (+)

D6.3 UtilitEE Market Report – First Version

building codes and standards at a national level. (+)

Figure 10 PESTLE analysis for ESCO and energy efficiency market

In the above figure, certain factors listed are either listed as positive (+) or negative (-). This refers to whether or not the listed factor drivers or inhibits the development of the ESCO and building EE market.

D6.3 UtilitEE Market Report – First Version

4.3 Demand response market and aggregators in the EU

4.3.1 Market overview

One of the principle business models set forth in this project is for utilities or energy retailers to act as Demand Aggregators in order to modulate peak demand situations for the easier integration of renewables within the energy mix as well as a minimisation of grid and infrastructure cost during peaks. Moreover, as mentioned by the first version of the exploitation plan, selling the solution to independent demand aggregators who would obtain occupant profiles and gain information on their flexibility and comfort levels for optimal load shedding could be another avenue for exploitation beyond the simple scope of utilities, despite the latter being the main objective. By being able to integrate demand response activities with behavioural insights on energy consumption reduction, utilities would essentially be implementing hybrid business models around the capacity of providing simultaneously traditional ESCO services with demand side management (DSM) services. In order for the consortium to grasp full comprehension of the DSM market, the following section will offer insight on the progress of DSM in regional European markets, the drivers and barriers that affect this market as well as the needed macro-economic and energy market conditions required for the successful implementation of DSM frameworks.

Demand Response and the Demand Response aggregator market relate to the voluntary changes in the consumption patterns of energy on part of end users and final customers through remuneration and economic incentive mechanisms. Usually, this shift in electricity demand at a different point in time is performed automatically or manually, with the possibility of bidding in electricity markets, often through a third-party aggregator. Demand Response is more and more conceived as one of the critical resources for improving the efficiency and sustainability of electricity production at sensible costs. In fact, Demand Response is an important enabler of security of supply with better management of peak energy demand, integration of renewable energy sources, improved market competition and consumer empowerment. The following figure gives a simplified visual account of the concept behind Demand Response:

Figure 11 Demand Response SEDC [21]

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In order to properly assess the potential for UtilitEE to offer exploitable results for the demand aggregator market, it is necessary to perform a full analysis of the burgeoning European Market which should continue to expand and increase with the momentum of the European Efficiency Directive and specifically Article 15. The next sections will therefore analyse the current state of the Demand Response markets within the European Union with a specific focus on Western Europe and Demand Response Aggregators.

Regional market dynamics

In terms of quantifying the market, it is difficult to perform an estimate in terms of potential market turnover considering the dynamic nature of pricing in a classic demand response setting. Nevertheless, it is possible to estimate the potential market in watts. In their study on the potential of demand response in Europe, Energy Sia Partners take a top down approach to estimate the market where they first identify main sectors for demand response, then the main appliances concerned, and then the part of each appliance in electricity consumption in order to establish the volume of energy demand that can be shifted from each of these taking a percentage of peak demand. The following tables offer a summary of the results obtained through this methodology (using 2012 data) [22]:

Figure 12 Demand Response Potential and Percentage of Peak Load in the EU

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As we can see, it is estimated that a total a total of 52.35 GW of demand can be shifted or reduced through Demand Response markets. The residential sector stands for 42% of this potential market, the industrial represents 31% and the tertiary group represents 27%. Within the framework of the UtilitEE project, we are mainly concerned with the tertiary and residential sectors which account in total for 36 GW. Considering that it is estimated that the European Union will lack 47 GW in 2020 in terms of capacity generation, it is promising to see such encouraging Demand Response potential figures and forecasts.

Furthermore, when segmenting these results by country as presented in the second figure above, it is possible to observe the dominant potential of Western European nations in demand shifting. Indeed, Germany (9.6 GW), France (8.1 GW), United Kingdom (5.8 GW), Italy (5.1 GW) and Spain (4.8 GW) have the largest amounts in GW. However, being at its infancy in Europe in relation to markets or countries like the United States, DSM markets are still not as open and market maturity differs regionally. The following section will observe the regulatory state and acceptance of demand response in individual countries.

The Explicit Demand Response in Europe - Mapping the Market 2017 report performed by the Smart Energy Demand Coalition gives us a regionalized or sub market analysis and perspective of flexible demand approaches according to 4 main axes: Demand Response access to markets, service providers’ access to markets, product requirements, M&V payments and penalties [21]. These criteria correspond to the necessary market, macro-economic and environmental conditions for effective demand response aggregator markets and can be effectively seen as drivers. Each EU member state is given a grading according to each criteria which then provides a general picture of the state of the DSM market maturity and readiness within them. This report will compile this regional grading in order to determine the countries offering the most promising market environments for the exploitation of the key exploitable results being developed in UtilitEE and the potential for applying the Utilities as Aggregators business model.

Specificities on the SEDC grading system can be found in the annex of this report.

SEDC Grading Results

The following table summarizes the results of the analysis performed by the Smart Energy Demand Coalition for 2017.

Demand Service Product M&V, Payments Overall Response Access provider access requirements and Penalties Austria 3 2 4 3 12 Belgium 3 3 4 3 13 Denmark 3 2 3 3 11

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Estonia 2 1 2 1 6 Finland 4 2 3 4 13 France 4 4 4 3 15 Germany 3 2 3 3 11 Great Britain 4 3 3 3 13 Ireland 4 4 3 2 13 Italy 2 1 2 2 7 Netherlands 3 2 3 3 11 Norways 3 2 3 3 11 Poland 2 2 2 2 8 Portugal 1 1 2 1 5 Slovenia 2 2 1 3 8 Spain 1 1 2 1 5 Sweden 3 2 3 3 11 Switzerland 3 4 3 4 14 Overall 50 40 47 43 187 Max score 72 72 72 72 288 Table 4 Detailed country grading of the SEDC 2017

Moreover the following map enables us to transpose this information and gain a more geographic and regional-sectorial perspective of the demand response market throughout Europe.

D6.3 UtilitEE Market Report – First Version

Figure 13 Map of Explicit Demand Response development in Europe today

According to the report and in line with the grading provided above, on a regional basis, in 2017, countries where considerations for Demand Response are generally completely absent, such as Estonia, Spain, Italy, have seen a rise in regulatory interest.

Indeed, for Estonia, a process among Baltic countries and potentially Nordic countries is ongoing aimed at opening markets to aggregated Demand Response. The details of this regulatory framework are to be published next year.

In terms of the Italian Demand Response market, the implementation of certain products aimed at balancing demand-side resources could lead to an opening of the market. A new piece of legislation where the Italian NRA (AEEGSI) defined the first phase of the Balancing Market Reform (RDE-1) should provide the basis for the blossoming of the market. Within this framework the market will open to demand, distributed generation, RES, and high-performance co-generation. At

D6.3 UtilitEE Market Report – First Version the same time, access mechanisms of demand to balancing and reserve markets (including aggregation), reform balancing pricing, and revise geographic zone division will be regulated.

Spain seems to present the right predispositions to adopt Demand Response. Indeed, default energy prices for households are hourly spot prices which are necessary for implementing Demand Response and aggregation efficiently. Nevertheless, so far Explicit Demand Response activity is limited to industrial consumers. This may change as currently, it is believed that the transmission service operator is negotiating with relevant stakeholders about the future opening of these services to flexible demand.

On the other hand, currently the most open and adoptive European countries with the most conducive framework for the growth of Demand Response are Switzerland, France, Belgium, Finland, Great Britain, and Ireland with France and the United Kingdom being two of the most important potential markets in volume as seen earlier. However, market design and regulatory issues persist even in these countries. France has a detailed framework in place for independent aggregation, including standardized roles and responsibilities of market stakeholders.

As countries relax their regulations in regards to Demand Response markets and as nations currently in a preliminary development phase or partially open continue to roll out favorable provisions, UtilitEE outputs should be increasingly interesting for these market players.

From a strategic point of view and in terms of product rollout and market maturity, it may be a good move for the consortium to focus on traditional ESCO approaches in the beginning and then branch out to DSM activities.

In order to provide deeper insight for the optimal positioning of the UtilitEE service and product offerings, the next iteration of this market report will go into deeper detail

4.3.2 Market Drivers and Barriers: Optimal market, macroeconomic and environmental configurations

The main market drivers and barriers towards promoting the concept of demand response through the role of DSM Aggregators are summarized in this section.

1. The regulatory framework in Europe for Demand Response is progressing. Nevertheless, the state of regulation and market openness across different EU regions is fragmented in its level of advancement. With the EU´s objective of obtaining a harmonized Internal Energy Market, more efforts are to be performed in order to foster the implementation of favorable regulation. Some cross regional cooperation and openness in wholesale and balancing markets has generally been seen. However, certain barriers are still in place on the level of product requirements and restricted consumer access.

D6.3 UtilitEE Market Report – First Version

2. Restricted consumer access to Demand Response service providers are still present and constitute a major barrier towards the effective development of the market. Competition amongst service providers is an essential building block in order to create a market with the desired dynamics that maximize the benefits of Demand Response. The lack of competition is caused in part by the issue of access for independent aggregators to the wholesale market across the majority of Member States. Generally, frameworks provide access only to retailers and balance responsible parties in order to aggregate and sell their own consumers’ flexibility. Sometimes, large consumers and Virtual Power Plants can sell their electricity directly on the market. This and the opening of balancing markets and ancillary services must be tackled in order to establish a level of competition that is beneficial for the market. This barrier mostly affects the UtilitEE project in terms of offering the solution directly to DR aggregators as well as other DSM service providers and not so much for the implementation of these approaches directly for utilities and retailers.

3. Progress has been made in opening balancing markets to demand-side management. In some countries, balancing market programs have been opened for pilot projects, while in others overall market design reform will open the whole market to demand-side resources. This trend is observed even amongst the member states with the least open frameworks.

4. Local System Services have not been established yet in most member states except for Great Britain. Indeed, throughout Europe very little incentives for Distribution System Operators to use market flexibility exist.

Considering these conclusions, the market for Demand Response and Demand Flexibility across Europe is still at its initial stages. As article 15 of the European Efficiency Directive pushes towards the adoption of demand flexibility and adoption of demand response aggregators within energy markets for the benefit of an Internal Energy Market, opportunities for the use of UtilitEE project outcomes in terms of DSM should grow in the coming years.

4.3.3 PESTLE Analysis

Once again, considering the DSM/DR sector is one of the underlying markets for UtilitEE, a PESTLE analysis defining the different political, economic, social, technological, environmental, and legal influential factors that can drive or jeopardize the successful rollout of project results is provided.

Political factors: Economic factors: • Electricity Directive • Energy price volatility and (2009/72/EC) and Article 15 of deregulation of energy markets. the Energy Efficiency Directive (+)

D6.3 UtilitEE Market Report – First Version

(2012/27/EU) call for the • Implementation of white removal of those incentives certificates and other economic that might hamper incentives means utilities and participation of Demand energy retailers must find ways Response, in balancing of achieving better load markets and ancillary services management and energy savings procurement. Member States to stay profitable. (+) shall ensure that national • Proliferation of new business regulatory authorities models and revenue generating encourage demand side approaches for utilities. (+) resources. Member States • Growth of IoT and smart homes must ensure that transmission and smart buildings sector as a system operators and whole. (+) distribution system operators, in meeting requirements for balancing and ancillary services, treat Demand Response providers, including aggregators, in a non- discriminatory manner. • Support programs for the development of relevant DSM and DR technologies and programs (H2020...) (+) • Regional differences in political support for introduction of DSM and frameworks in place means such approaches cannot be universally applied throughout the EU at the moment. (-)

Social factors: Technological factors: • Reluctance of end users to • Mature big data solutions (+) have behavioural data tracked • Democratization of cloud and stored. Recent examples computing (+) shows a certain reluctance in • Low cost of available hardware even implementing advanced as well as network technologies metering. (-) and communication protocols • General trend and growing with simplified installation. (+) importance of energy efficient • Easy access to technologies and products, smart homes and services through SaaS solutions IoT (+) for instance. (+) • Increasing knowledge and awareness levels in relation to sustainable buildings and houses. (+)

Legal factors: Environmental factors: • Country level regulations and • - Preoccupation for GHG laws that form energy markets emissions and climate change

D6.3 UtilitEE Market Report – First Version

are heterogeneous across (COP21...). (+) Europe with different degrees • - Targeted environmental KPIs of market openness towards and objectives shared in the EU. DSM and DR services and (+) activities. (-) • - Threshold levels of renewables and VPP integration. (+)

Figure 14 PESTLE analysis for DR and Aggregators market in Europe

D6.3 UtilitEE Market Report – First Version

4.4 Consolidation of analyses for business model fit

As mentioned in the previous sections of this report, the observations made in terms of the ESCO and energy efficiency markets as well as the ones made for the DSM and aggregator markets will be cross referenced in order to provide a mapping indicating fit for the business models envisioned within the UtilitEE project (utility as an ESCO; utility as an aggregator) to understand which member states represent the highest commercial potential and highest chances for success.

Taking solutions to market is a resource intensive process, therefore efforts must be allocated towards markets presenting the highest revenue potential. Considering a service/product based on UtilitEE is likely to be most successful commercially and maximize revenue in countries with highly active ESCO markets as well as open Demand Response markets, this section offers a regional snapshot of optimal business model fit. Moreover, knowing what services (solely ESCO style service or combination with DR services) can likely be successfully marketed in certain countries will help you estimate market penetration and cash flows along with other KPIs useful for the completion of Task 6.3 down the line.

In order to perform this task, it is important to create a grading system to judge the state of ESCO markets at a country level so that this can be cross referenced with the grading already performed by the SEDC.

In table 1, we have listed numbers corresponding to market size with the amount of registered ESCOs per country and market value with annual turnover. In order to provide an assessment of the ESCO market attractiveness, we will focus on indicators on the number of ESCOS and turnover levels. The following table presents these numbers per member state:

Number of ESCOs 2015-2016 (2010 or Market value in millions € in turnover 2015-2016 Country 2013 numbers used when no recent data (2010 or 2013 numbers used when no recent data is available) is available) Austria 40 20m (2013) Belgium 15 15m (2013) Bulgaria 15 33m Croatia 15 10m (2013) Cyprus 19 n/a Czech Republic 20 20m Denmark 10 150m Estonia 3 n/a Finland 8 10m (2013) France 300+ 3200m Germany 500+ 5000m Greece 47 n/a Hungary 10 n/a Ireland 15 100m Italy 100 1000m Latvia 60 10m Lithuania 6 n/a Luxemburg 5 n/a Netherlands 100 n/a Poland 50 (2013) 25m(2010) Portugal 10 30m(2010) Romania 20 5m Slovakia 50 60m

D6.3 UtilitEE Market Report – First Version

Spain 368 400m(2013) Sweden 8 (2010) 80m (2013) United Kingdom 50+ 400m Table 5 ESCO market value and size indicators

The specificities with respect to the grading system developed specifically for this report can be found in the annex. All grading systems were based out of 1-4 in order to enable comparative assessments with SEDC findings.

The following table provides a summary of this scoring:

Country ESCO market size ESCO market value Overall Austria 2 2 2,00 Belgium 2 1 1,50 Bulgaria 2 2 2,00 Croatia 2 1 1,50 Cyprus 2 2

Czech Republic 3 2 2,5 Denmark 2 3 2,5 Estonia 1 1

Finland 1 1 1 France 4 4 4 Germany 4 4 4 Greece 3 3

Hungary 2 2,00

Ireland 2 3 2,5 Italy 4 4 4 Latvia 4 1 2,5 Lithuania 1 1

Luxemburg 1 1

Netherlands 3 3

Poland 4 2 3 Portugal 2 2 2 Romania 3 1 2 Slovakia 4 2 3 Spain 4 4 4 Sweden 1 2 1,5 United Kingdom 4 4 4 Table 6 ESCO market scoring

As the UtilitEE project will benefit from the most open and developed ESCO and DSM market environments, the previous ESCO market scores are to be compared to those of the SEDC report in order to evaluate the commercial potential of the solutions and business model implementation in each member state. The SEDC market report attributed an overall market ranking in terms of DSM market activity (with results in table 8 section 4.3.1.2) which we have set on a scale of 1-4 in order to correspond with our previous grading for the ESCO market and in order for us to create a final indicator averaging both of these.

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Grade Relative status of demand response 4 Commercially Active 3 Partial Opening 2 Preliminary Development 1 Closed Table 7 SEDC Overall rescaled grading

Weighting equally both overall scores for ESCO and SEDC DSM overall market attractiveness rankings we are able to create a combined indicator called the UtilitEE Market Opportunity Index (UMOI) which aims to rank member states/national markets based on the commercial opportunities they represent for the exploitation of UtilitEE project results and the roll out of envisioned business models. The following table presents the UMOI grading system.

UtilitEE market opportunities/potential UMOI Very high 4≥x>3,5 High 3,5≥x≥3 Medium 3≥x≥2 Low 2>x≥1 Table 8 UMOI grading system

Applying the UMOI approach, we obtain the following mapping and scores for Member States where the required indicators are available:

D6.3 UtilitEE Market Report – First Version

Figure 15 UMOI mapping

Overall market status Overall ESCO market of demand response UMOI attractiveness grade grade

Austria 2,00 3 2,5 Belgium 1,50 4 2,75 Denmark 2,5 3 2,75 Estonia 1 1 1 Finland 1 4 2,5 France 4 4 4 Germany 4 3 3,5 Great Britain 4 4 4

D6.3 UtilitEE Market Report – First Version

Ireland 2,5 4 3,25 Italy 4 1 2,5 Netherlands 3 3 3 Poland 3 2 2,5 Portugal 2 1 1,5 Spain 4 1 2,5 Sweden 1,5 3 2,25 Table 9 UMOI Scores

As a conclusion to this section, it becomes apparent that currently, given the structure and openness of demand response markets as well as the size and evolution of ESCO markets, the United Kingdom and France seem to present high market potential for the UtilitEE project. Nevertheless, it is important to remember that these scores tend to average certain effects. For instance, Germany has the highest ESCO market value and size and is making moves for more openness in terms of smart demand/DSM market frameworks. Moreover, Spain may have received a low assessment in the SEDC report. Nevertheless, crucial prerequisites for the successful penetration of smart demand such as hourly spot rates at the domestic level are already in place which should facilitate development.

In previous section, we presented the market framework for the key business roles as defined in the project, ESCOs and DR Aggregators. In the following sections, the market analysis will focus on the product and service initiatives defined in the UtilitEE project, namely: energy management systems for homes and buildings from a hardware and software perspective as well as utility level solutions.

D6.3 UtilitEE Market Report – First Version

4.5 Energy Management Systems and Solutions

As introduced in the section on utilities, UtilitEE plans to add value to utility operations and diversify their revenue streams and business models and approaches through the creation of downstream services and products that base themselves on ICT and IoT technologies pertaining to the smart homes, building energy management systems and utility level solutions market.

4.5.1 Smart homes general overview

The Smart Home terminology and market is a wide domain which encompasses the sale of networked devices and related services to enable home automation for private end users. The smart devices or systems communicate with one another, can be controlled remotely and can report on maintenance needs.

The main applications and motives for the adoption of smart homes are enhancing comfort, safety and security, cost savings through more efficient management of appliances and systems and productivity. Some major segments include home entertainment, security, domestic appliances, health and prevention and energy/lighting management which is most relevant to the UtilitEE project.

As a consolidated segment, connected and smart homes represent the largest IoT segment (26% of the market) with seven billion devices in total [17].

According to Statista´s 2018 Smart Home Market Report, revenue of the Smart Homes market worldwide is forecast to grow to 121,960 billion US dollars by 2022 Figure 16 Smart Home while being currently evaluated at around 48.710 billion Segments US dollars in 2018 representing a forecasted global 25.8% compound annual growth rate from 2018-2022 [15]. In fact, the International Energy Agency predicts that by 2040, 1 billion households and 11 billion smart appliances will provide the foundation to interconnected electricity systems with smart meters and connected devices. To contrast this, currently an estimated 107.3 million homes are equipped with smart devices worldwide accounting for smart meters as well. This represents a penetration rate of around 7.5% and is expected to increase to 19.5% by 2022.

In terms of Europe, which is of course the continental region of focus for the UtilitEE project, revenue in the smart home market is estimated at around 11,884 billion US dollars in 2018 or 24% of the worldwide market, and predicted to grow at a CAGR of 25.3% until 2022 to reach 29,278 billion US dollars of revenue which again represents 24% of the total worldwide forecasted revenue for the same year. Therefore, Europe is on trend with the high growth numbers

D6.3 UtilitEE Market Report – First Version associated to the penetration of smart home technologies. The following figure is a breakdown of revenue per segment in past years dating back to 2016 and forecasted in the oncoming years [15].

Smart Home revenue per major segment in Europe 35,000.00

30,000.00

25,000.00 4000.6 20,000.00 3357.5 2763.4 15,000.00

2166.4 Millions Millions $ US

10,000.00 1588.1 1084.9 5,000.00 702.8 0.00 2016 2017 2018 2019 2020 2021 2022

Control and connectivity Confort and lighting Security Home entertainment Energy Managment Smart Appliances

Figure 17 Smart home revenue per segment in Europe

As can be seen in this figure, energy management is not the largest segment in the smart home space in Europe. Nevertheless, it is forecasted that the sector should grow substantially from under 1.6 billion US dollars in 2018 to around 4 billion US dollars in 2022. With new national norms in terms of smart meters and their wide spread adoption, the energy management segment should see healthy growth over the coming years.

In terms of market penetration rates amongst homes in Europe, the current rate is estimated at about 9,4% in 2018 and forecasted to grow to 21.7% in 2022. The following figures represent the current and forecasted number of homes with smart devices installed as well as the corresponding penetration rates [15].

D6.3 UtilitEE Market Report – First Version

Homes with smart devices per segment in Europe 50.00

45.00

40.00

35.00 28.15 30.00 22.6 25.00 17.58 20.00 13.1 Millions Millions homes of 15.00 9.35 10.00 6.5 5.00 4.55 0.00 2016 2017 2018 2019 2020 2021 2022

Control and connectivity Confort and lighting Security Home entertainment Energy Managment Smart Appliances

Figure 18 Smart homes with smart devices in Europe

Smart Home penetration rates amongst homes per segment in Europe 18.00%

16.00%

14.00%

12.00% 10.46%

10.00% 8.41%

8.00% 6.55% 4.89%

6.00% Penetrationrate 3.50% 4.00% 2.43% 2.00% 1.71% 0.00% 2016 2017 2018 2019 2020 2021 2022

Control and connectivity Confort and lighting Security Home entertainment Energy Managment Smart Appliances

Figure 19 Smart home penetration rates in Europe

These graphs are non-cumulative and segment specific meaning some homes might be counted for in multiple segments. In terms of the energy segment, a growth from 9.35 million homes across Europe accounting for 3.5% of total

D6.3 UtilitEE Market Report – First Version amount to 28.15 million homes accounting for 10.46% of the total amount of homes is forecasted standing for a potent market with strong growth.

So far, the scope of our analysis has been extremely large even taking into consideration basic smart or connected meters for the energy management segment without determining whether or not systems offer control and automation. In order to focus on the smart home devices and technological implements that are particularly relevant to the UtilitEE project, it is important that we explore in further detail the Home Energy Management Systems market.

4.5.1.1 Home Energy Management Systems general overview (HEMS) Home energy management system (HEMS) is composed of hardware and software systems that enable home users to monitor and reduce energy consumption of various electrical devices and appliances installed in their homes. HEMS are generally comprised of five different products, which assist in managing and reducing energy consumption: self-monitoring systems, lighting controls, programmable communicating thermostats, advanced central controllers and intelligent HVAC controllers. Moreover, one of the key features of modern HEMS is the ability to connect to the system and real time energy consumption remotely through tablets and other mobile devices in order to monitor and manage energy consumption. In addition, in some instances HEMS have the ability to provide updates on fluctuating electricity prices to assist users to use less energy during peak hours, essentially working as an implicit demand response system. These systems can also be used as a gateway for the implementation of explicit demand response systems requiring aggregation.

Currently players in the HEMS market place either sell software, hardware or a combination of both as a package. Certain players such as EnergyHub for instance have shifted from focusing on hardware for HEMS to software solutions enabling utilities to connect to the plethora of existing devices while others such as Whisker Labs have developed load monitoring hardware and software environments with machine learning features and algorithms aimed at providing insight on energy consumption and savings. Users find themselves empowered to have more control over energy intensive processes and appliances within their home and adapt their consumption according to their needs and preferences.

In terms of market value the following table illustrates estimates from 2012 to 2025 obtained from a consolidation of different report from Navigant, Transparency Market Research and Dive [8].

D6.3 UtilitEE Market Report – First Version

HEMS Market Value 7000

6000 6053.4

5000

4842.8

4000 3874.2

3206.7 3000 3099.4

Millions ofUSD Millions 2479.5 2541.0 2000 1983.6 2013.5 1586.9 1595.4 1300.4 1264.2 1000 1065.6 1001.8 873.3 793.8 586.4 715.6 629.0 393.8 480.6 394.9 498.4 196.5 248.0 312.9 0 155.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

HEMS Global market size HEMS European market

Figure 20 HEMS market value estimates

The growth rates of the global HEMS market are estimated at around 25% between 2012 and 2019 and then at 22.03% between 2020 and 2025 moving from 393.8 million USD in 2012 to a little over 1.3 billion USD in 2018 and around 6 billion USD in 2025. Naturally, for the UtilitEE project the most interesting geographic market is that of Europe. Fortunately, the CAGR over the estimated periods is stronger than that of the industry as a whole moving from under half of global market share to a little over half of global market share in 2025 at around 3.2 billion USD in 2025.

Some of the main drivers responsible for these impressive growth rates are the development of IoT and cloud computing and big data as well as the current focus on sustainable practices in part sparked by regulations.

Considering the fact that many solutions are sold as hardware and software packages, it is extremely difficult to establish the market value of each respective segment. Nevertheless, the following sections will go over the main characteristics of both the hardware and software markets for HEMS.

4.5.1.2 Home Energy Management Systems hardware market

In terms of hardware, a home energy management system consists of a ‘hub’ device which transmits communications between the monitoring and control devices inside the house, the user and in some cases the local utility or electricity retailer. This central hub is typically installed on the electrical board, but may

D6.3 UtilitEE Market Report – First Version also be installed ‘virtually’ in cases where the HEMS operates purely on a wireless network.

Secondary components include ‘smart plugs‘, light & temperature sensors, and smart devices within the home.

HEMS hardware can be separated into two main categories: a more upstream category of products providing the data and insights and enabling users to manage energy consumption in their home and a more downstream set of products and devices allowing for monitoring, data gathering and control of appliances through sensors, operating systems, communication protocols and storage.

Upstream energy management products

 Energy Portal

Home energy management products under this category are normally integrated with existing hardware such as a smart appliance or a utility meter to collect and transmit information. Through the use of smartphone apps, websites and computer software, users can get feedback regarding the use of appliances connected to the portal, obtain energy saving prompts and implement remote control or automation of devices connected to the portal.

It is suggested that energy portals can lead to electricity savings of between 5.7% and 7.4% as well as gas savings of between 5.7% and 13%.

 In-Home Display

Products under this category collect data from existing hardware for instance from smart devices, sensors and utility meters in order to provide feedback and prompts on real time energy consumption through a physical display in the home. These products also facilitate remote control and automation of connected devices. In-home displays being the most direct interface of the HEMS system, they are generally considered the core of the system.

In-home displays come as either a stand-alone unit or as a unit integrated into existing appliances. Research suggests that in-home displays can lead to electricity and gas savings of between 5% and 22%.

 Load Monitor

Load monitors are a proxy between the source of energy and the appliance consuming the energy. This allows it to collect and display information about the connected appliance’s energy consumption.

This device does not serve a communicative function in that the information collected remains on the load monitor unless the user manually uploads it to a computer through a physical connection.

D6.3 UtilitEE Market Report – First Version

Downstream smart hardware

 Smart Appliances

These are electric appliances which can receive, interpret and respond to signals received from a home energy management device, utility or even a 3rd party energy service provider in the case of demand response activities. In addition to that, the appliance can automatically modify its moderation based on the contents of the signal received.

Smart appliances may also have built-in displays from which the user can control the appliances´ settings (putting in place triggers and use cues) and also view information on the appliances´ energy consumption. Many smart appliances can also integrate with mobile phone applications which subsequently allows users to control them from their smartphones or tablets.

 Smart Thermostats

These are devices enable home owners to monitor and control the energy consumption of connected heating ventilation and air conditioning (HVAC) systems either through remote controls or rule-based control mechanisms. Those based on rule-based control are also known as programmable thermostats and can be programmed in a way which maintains desired comfort levels.

Smart thermostats are the central home energy management system product since heating and cooling amount to over half of the average energy consumption in European households. Homes that use smart thermostats can achieve electricity savings of between 2% and 16% and gas savings of between 8% and 12.5%.

 Smart Plugs

Smart plugs function as a proxy between an energy source and an electricity consuming appliance connected to the source. This allows users to have control and receive feedback from the energy consuming appliance. Some smart plugs also allow users to control them remotely from their smartphones, mobile applications, and other internet-enabled devices.

Smart plugs have the particular advantage of bringing the advantages of smart appliances to traditional appliances. Research suggests that smart plugs could result in energy demand savings of between 0.5kW and 1.0 kW per customer and an overall energy saving of between 1% and 4.58%.

 Smart Hubs

This product category of home energy management systems is comprised of devices that serve the function of facilitating communication and interaction between smart appliances in the same home.

D6.3 UtilitEE Market Report – First Version

The smart hub, therefore, creates a network between different smart home devices such that users can control them over a single network and via a single smartphone, tablet or another Internet-enabled device.

From a market value point of view, it is difficult to obtain disaggregated data for the HEMS market with a clear segmentation between software and hardware based revenues. Nevertheless, information does exist for the wireless sensor market and smart thermostats market for smart buildings and homes. In the following figure from a Navigant study, it is possible to observe the important growth of the sensor hardware market over the 2016-2025 forecast period with a CAGR of 16.5% with total sales of 745.2 million USD worldwide in 2025.

Figure 21 Wireless Sensor market [19]

In addition to this, the following graph represents forecasts in market growth for smart thermostats which should reach around 4.4 billion USD by 2025 starting from 1.1 billion USD in 2016 representing an estimated CAGR of 16.6 between 2016 and 2025.

D6.3 UtilitEE Market Report – First Version

Figure 22 Smart Thermostat market [23]

These growth rates are encouraging as they reflect expanding demand for energy/building and home related IoT based products. It can be expected that sales in other HEMS hardware categories should follow suit. Moreover, another positive aspect to these forecasts is that Europe should represent the largest geographic/continental market and be a major driver in demand growth.

Communication protocols

The platform for the communication between all devices of a HEM is known as the Home Area Network (HAN) which can use different network and communication technologies. Generally, HAN´s only require very short acquisition time for sending data to different destinations cutting down on bandwidth requirements compared to traditional link-based systems that pertain to common communication and entertainment systems within the home. The following figure illustrates the set of most commonly used wired and wireless technologies and protocols used for HEMS implementation.

D6.3 UtilitEE Market Report – First Version

HAN communication and network technologies

Wired Electrical wiring, telephone line, Wireless Radio Frequency optical fiber

- HomePlug - Ethernet (Internet - x10 Protocol) - Insteon Battery operated/ No Battery-free/ Energy energy harvesting harvesting ITU G.hn (IPv4, IPv6)

- Z-Wave EnOcean (Internet (Internet - Wifi Protocol) Protocol) - ONE-NET

6LoWPAN (IPv6)

ZigBee (none)

Figure 23 Communication Protocols [10]

The following table provides a quick overview of communications and networking technologies for home area networks.

Table 10 Summary of communications and network technologies for home area networks [10]

Currently, the HEMS market seems set to grow substantially in parallel to ZigBee protocol. As it can be structured in a variety of topologies such as mesh (wider range), stellate, and tree, ZigBee is becoming the preferred option by most of the HEMS providers. ZigBee is preferred for applications related to low data rate, long battery life (up to ten years), and secure networking while also providing high compatibility.

D6.3 UtilitEE Market Report – First Version

4.5.1.3 Home Energy Management Systems software market The software used in a HEMS is what controls the ingoing and outgoing data and communications. From a user’s perspective, the software is the interface that allows access to monitoring data and control functions of the system. The interface usually takes the form of an app or web portal.

The software for HEMS has the objective of increasing the energy effectiveness or efficiency of the household through automation, while others simply control devices remotely or automatically for convenience or security purposes.

HEMS software therefore have two main features/functions in relation to the objectives described above. One that relates to visualization and monitoring and another that relates to actual control.

In terms of monitoring and visualization, the sophistication of the way in which data is displayed generally depends on the following:  Device & appliance data –Which devices are operating and how much energy they are using?  Granularity of time data – What is the smallest time increment that the system displays?  Insights delivered – Does the system send notifications to tip off the user to trends and issues that they may not pick up on or do they have to analyze the data themselves?

In terms of control, a HEMS may allow a user to:  Remote shutoff and start of devices  Set schedules for devices

 Set up conditional rules and triggers for device operation

 Manage the flow of energy from solar panels (and other generators) through the home or in and out of batteries

 Allow ‘machine learning‘ to take over and run the system semi- automatically

HEMS software platforms can be separated into three main categories: Smart home platforms, data analytics platforms and web services platforms.

Smart home platforms are simply a centralized interface for smart device control with standardized models of interaction and communication between the elements of the HEMS.

Data analytics platforms analyze collected data, apply machine learning algorithms and methodologies in order to provide insights for saving energy. The development of cloud computing is central to the development of these software.

D6.3 UtilitEE Market Report – First Version

Web services platforms are different with respect to the two previous types not in terms of functions but in terms of control offered to end users through API access. Devices can be controlled remotely and can set up conditions and rule based systems for device operations.

Of course, many HEMS software platforms today inscribe themselves vertically with respect to these typologies and perform a combination of the functions described.

4.5.1.4 Competitive market assessment In order to provide the UtilitEE consortium with an assessment of the competitiveness of the HEMS and relevant areas of the home automation systems market, a Porter´s five forces analysis has been applied as follows.

Threat of new entrants 5 4 3 2 1 Bargaining power Bargaining power 0 of suppliers of buyers

Threat of substitute

products Figure 24 Porter´s Five forces diagram for the HEMS/HAS market

PORTER´S COMPETITIVE RATING [1-5] DRIVERS FORCE  Lower cost solutions offered by under-the-radar competitors i.e. technology giants like Apple, Google  Integrated solutions offering not only energy management functions but overall smart home/ building functionality and automation functions, THREAT OF NEW 5 directly targeting millennials. ENTRANTS  Solutions being offered are still at a growth stage in the product life cycle meaning new entrants are likely.  There are a great amount of players in the market space with limited amounts of market share dominance and established technologies and standards are still at a mobile stage.

D6.3 UtilitEE Market Report – First Version

 The wealth of products available in the market BARGAINING increases the bargaining power of customers. POWER OF 5  High levels of interoperability between devices and BUYERS products with the use of standardized communication protocols means buyers can vary purchases. Research efforts and financial resources are currently THREAT OF being targeted towards home automation and energy SUBSTITUTE 4 management due to increased demand demand. This PRODUCTS could lead to the advent of cheaper, more efficient, high performance solutions  Hardware and IoT device providers for small scale BARGAINING smart home applications are numerous and POWER OF 4 increasing in number reducing their power over SUPPLIERS their buyers because of substitute threats.  Outsourced components and products are of a simple nature and widely available. Table 11 Porter´s 5 forces analysis HEMS/HAS market

Unsurprisingly, the HEMS market is extremely competitive at this stage in its development scoring high in all categories. Considering the fact that we are at a preliminary stage of the smart home boom and that energy management and sustainability issues are becoming omnipresent forces in modern society, this particular market is affected by potential movements in stakeholder structures at every level of the supply chain on both the supply and the demand side. Currently, from a product lifecycle perspective, the HEMS market is at a growth stage which is characterized by many competitors entering the market increasing levels of competition as depicted in the following figure:

Figure 25 Product life cycle stages and characteristics

D6.3 UtilitEE Market Report – First Version

These Porter scores should lower as the market steers itself towards specific standards in networks and communication protocols and a clearer set of dominant players emerges when transitioning from growth to market maturity stages.

Considering the focus of the UtilitEE project is on having utilities leverage HEMS technologies, innovations and services in order to diversify their service portfolio and revenue streams, the next section will be aimed at assessing the market for utility solutions in energy management.

4.5.2 Building energy management systems segment (BEMS)

As the UtilitEE project can be targeted towards the energy management segment of the smart home market as well as larger buildings, it is important to make observations on the general trends and movements that characterize the building energy management systems (BEMS) sector as well.

4.5.2.1 Building energy management systems general overview BEMS deliver efficiency in one of two ways: via focused improvements in heating, ventilation, and air conditioning (HVAC), lighting, plug loads, or fire and security systems; or via the integrated management of multiple systems. To put it as simply as possible, BEMS are systems of hardware and software allowing the monitoring, analysis and control of buildings´ energy consumption. On top of the software and hardware segments, fully comprehensive services are often offered around the systems.

They provide real-time remote monitoring and control of a wide range of connected energy hungry systems, allowing operation, energy use, environmental conditions and so on to be monitored and enabling the adjustment of hours of operation, optimising energy performance and comfort. BEMS can also have predictive functions built within them triggering alarms, in some cases bringing insight on required maintenance programs. Moreover, they record historical data logs of building and energy performance giving way to possibilities for data comparative analysis and benchmarking of performance against other buildings or sites.

According to recent reports BEMS revenue is estimated to reach a little over $6 billion in 2019 and is expected to grow to $9,32 billion by 2023 at a compound annual growth rate (CAGR) of 11,14% (2016-2023 period for CAGR calculation) [13].

D6.3 UtilitEE Market Report – First Version

BEMS worldwide market by product segment 10 9 8

3.21

7 2.88 6 2.59 2.33 5 2.09 1.88 3.04 4 1.69 2.74 1.52 2.47 2.22

Billions of USD Billions of 3 2.00 1.62 1.80 2 1.46 3.07 2.24 2.49 2.76 1 1.47 1.63 1.81 2.02 0 2016 2017 2018 2019 2020 2021 2022 2023

Software Hardware Services

Figure 26 BEMS worldwide market by product segment

The figure above illustrates the forecasted evolution of the BEMS market worldwide. An interesting observation is that the market is approximately divided equally amongst it three main product segments.

Moreover, from a geographic point of view, Europe represents the largest market in terms of energy management systems applied to buildings representing a stable 45% of the market compared to 33% for the USA according to the BSRIA [18]. The following figure illustrates this breakdown according to actual market values.

BEMS worldwide market by region 10 9 8 2.05

1.84 7 1.66 6 1.49 1.34 5 4.19 1.21 3.77 1.09 3.40 4 0.98 3.06 2.75

Billions of USD Billions of 3 2.47 2.00 2.23 2 2.77 3.08 1 2.24 2.49 1.47 1.63 1.81 2.02 0 2016 2017 2018 2019 2020 2021 2022 2023

USA Europe Rest of the world

Figure 27 BEMS worldwide market by region

This figure is encouraging for the prospects of the UtilitEE project with an estimated market size of 4.19 billion USD by 2023.

D6.3 UtilitEE Market Report – First Version

A well-designed and implemented BEMS provides energy, cost, and maintenance savings changing the energy management paradigm to deliver strategic and holistic management of facilities and equipment.

By considering the importance of BEMS solutions as defined in current regulation, we have to further proceed with the dimensional analysis of the functionalities offered by BEMS tools especially as the UtilitEE project is geared mainly towards specific dimensions related to analytics. Systems can generally be categorized in terms of functional offerings and architecture while the solution maturity may vary in terms of integration complexity and capabilities. In terms of solution architecture, BEMS offerings can include software, services, and/or hardware in an array of combinations designed to address the customer’s specific needs based on the existing infrastructure.

Figure 28 Traditional BEMS Functional Analysis

The common denominator for all BEMS tools is:

 Monitoring of building status and contextual conditions (sensor and hardware domain): o Energy consumption and set points of HVAC, lighting, other devices o Environmental conditions, e.g. temperature, humidity, luminance, occupancy etc.  Provision of energy management information (information management layer and data analytics layer)  Control of services and functions of one or several buildings  Possibility of automatic control of services and functions. For instance, automatic switch-on, switch-off of appliances  Optimization of building operations

In the case of UtilitEE all of these points are covered with the provision of energy management information covered in the Human Centric Behavioural Profile Interface, the optimization of building operations sent out in the feedback mechanisms and the control and automation of relevant appliances and systems (HVAC and Light) without deviating from occupant comfort.

D6.3 UtilitEE Market Report – First Version

Particularly relevant towards the project are hardware and software market segments which we will observe in more detail in the following sections.

4.5.2.2 Building energy management systems hardware market From a general standpoint, the hardware required for the implementation of BEMS systems is the same as that of a traditional Building Automation and Control System (BACS) albeit with a particular focus on the systems that pertain more directly to energy use such as HVAC, lighting and electrical systems.

It is generally accepted that BEMS are architecture around three layers or levels: the Management level (level 1), the Automation level (level 2) and the Field level (level 3). Each respective level contains its own subset of hardware components. Of course every layer communicates with each other in order for the BEMS system to work.

The hardware components of a BEMS are segmented amongst the 3 levels as follows:

Level 1: the Management Level

•Supervisory computers •Principal operator position or central station: Central dashboard or user interface for data reporting, interaction with the system and control over the system responding to the collected data using algorithms that apply logic and send commands

Level 2: Automation Level

•Direct digital controllers, intelligent outstations and plants. •Controllers or outstations: Outstations can function independently or can be controlled by the principal operator position. •Output devices/actuators: Carry out commands from the controller. On old BACS systems they used to be pneumatic. Today they simply work with electric current.

Level 3: Field Level

•Sensors: Sensors are used to measure input values such as temperature, humidity, lighting levels, room occupancy, and so on. This data is gathered, processed and analyzed in order for the system to make the appropriate decisions.

Figure 29 Hardware architecture of BEMS

D6.3 UtilitEE Market Report – First Version

It is often the case that basic BACS infrastructure already exists in a building. Many BEMS are actually designed in a way that they can integrate themselves on top of the existing implements.

BEMS tend to be more complex in nature to HEMS considering the more important amount of devices that need to be integrated in the network and the possibility to provide for control over multiple buildings.

For all these hardware components to work in a coordinated consolidated fashion, networks and communication protocols are established.

Network typologies

Three main types of networks are used mainly at field level which determine the amount of cabling needed, the reliability of the system as well as other technical characteristics:

 Ring: A ring cable connects devices directly to the databus.  Simple bus: Linear cable connects devices to the databus.  Star: devices are directly connected to the central control unit.  Tree: A hybrid between databus and star topologies.

Communications protocol

The BEMS market uses nonproprietary open platform protocols for greater interoperability between devices from a plethora of manufacturers. The International Organization for Standardization established ISO 7498 as a reference model for all protocols while the CEN is also working on established standards in language that all protocols must implement.

The most common protocols for BEMS are listed below [9]:

 Ethernet  Local Operating Networks (LON Works)  BACnet  ModBus  KNX  Internet

The diversity of protocols in the market means devices must be capable of translating different protocols. Nevertheless, as the BEMS market develops, IP based protocols will most likely become the most common language given the endless possibilities in terms of remote monitoring for instance.

In terms of market value, the BEMS hardware market is estimated to reach 3.04 billion USD by 2023 with a CAGR of 11.05% calculated on the basis of the data and estimates from the period between 2016 and 2023.

D6.3 UtilitEE Market Report – First Version

BEMS Hardware market per region 1.60

1.40 1.37 1.20 1.23 1.11 1.00 1.00 1.00 0.90 0.90 0.80 0.81 0.81 0.73 0.73 0.66 0.66 0.67 0.60 0.59 0.60 0.54 0.54 Billions of USD Billions of 0.48 0.49 0.40 0.40 0.44 0.32 0.36 0.20

0.00 2016 2017 2018 2019 2020 2021 2022 2023

USA Europe Rest of the world

Figure 30 BEMS hardware market per region

When looking at the geographical split for this market, it is projected that Europe will stand for 1.37 billion USD in revenue for BEMS software by 2023.

4.5.2.3 Building energy management systems software market BEMS software applications offer continuous monitoring and analysis of a building’s energy use. The software has the ability to disaggregate the energy used by different applications and systems (mainly lighting, heating and cooling) and then enable building owners or managers to set up dashboards breaking down energy use and analyse key performance indicators over time. Consequently, it enables the users to find areas of high energy use so they can make improvements through the control and automation features of the system.

Beyond the possibility of using the software´s control and automation features for optimising building operations, BEMS applications are also useful for detecting energy differentials or drifts over time lapses. As buildings age, this information can become extremely useful since components and systems work less efficiently and energy consumption starts to accrue. Indeed, a study has even found that energy savings declined by as much as eight percent every year without monitoring and maintenance.

On top of being its own software environment, BEMS software can also integrate with existing building management systems (BMS) and building automation systems (BAS). This makes it even easier to energy driven decisions for the management and automation of building components.

One of the major potentiates of BEMS software is the advent of cloud computing. BEMS software now offer remote access and control through applications with

D6.3 UtilitEE Market Report – First Version data being processed in a virtual cloud environment. This enables facility managers to have access to status reports for their buildings or even for multiple buildings across an entire portfolio in real time.

From a market value point of view, the BEMS software market is estimated to reach 3.07 billion USD by 2023 with a CAGR of 11.09% calculated on the basis of the data and estimates from the period between 2016 and 2023.

BEMS Software market per region 1.60

1.40 1.38

1.20 1.24 1.12 1.00 1.01 1.01 0.91 0.91 0.80 0.82 0.82 0.73 0.74 0.66 0.67 0.68 0.60 0.60 0.61 0.54 0.55 0.49 0.49 Billions of USD Billions of 0.40 0.40 0.44 0.32 0.36 0.20 0.00 2016 2017 2018 2019 2020 2021 2022 2023

USA Europe Rest of the world

Figure 31 BEMS Software market volume per region

When looking at the geographical split for this market, it is projected that Europe will stand for 1.38 billion USD in revenue for BEMS software by 2023.

4.5.2.4 Competitive market assessment In order to provide the UtilitEE consortium with an assessment of the competitiveness of the BEMS and relevant areas of the home automation systems market, a Porter´s five forces analysis has been applied as follows.

D6.3 UtilitEE Market Report – First Version

Threat of new entrants 5 4 3 2 1 Bargaining power Bargaining power 0 of suppliers of buyers

Threat of substitute

products Figure 32 Porter´s five forces diagram for the BEMS market

PORTER´S COMPETITIVE RATING [1-5] DRIVERS FORCE  Lower cost solutions offered by under-the-radar competitors i.e. technology giants like Apple, Google  The BEMS market has existed for much longer especially when taking into consideration the older THREAT OF NEW 3 analog BMS solutions. ENTRANTS  The market, even though it is experiencing the introduction of more powerful data processing modules and features, is still rather concentrated and dominated by a defined set of larger players such as Siemens, Johnson controls, Schneider Electric…  The wealth of products available in the market increases the bargaining power of customers. However, traditional building managers are keen to BARGAINING prefer vertical solutions offered by established POWER OF 3 market players based on market memory and what BUYERS they already have experience with.  BEMS can be installed on existing infrastructure and facility managers are likely to deal with provider of original building infrastructure. The market is still experiencing large amounts of THREAT OF innovations and resources being committed to research. SUBSTITUTE 4 The advent of solutions integrating more DSM features PRODUCTS across Europe as markets open should bring about new products.  IoT hardware and network infrastructure as well as BARGAINING cloud providers despite being a fast developing POWER OF 3 market are still clustered into a rather concentrated SUPPLIERS number of larger players dominating the market for BEMS. Table 12 Porter´s 5 forces analysis for the BEMS market

D6.3 UtilitEE Market Report – First Version

Despite the fact that it is forecasted that the BEMS market will experience high CAGRs of growth over the next years, the market is not as competitive as the HEMS market as it is at a more mature phase with well-established players. What is important to understand in this instance is that these scores do not reflect an easier situation for the UtilitEE products. For instance, threat of new entrants due to established players means it will be harder for any new player to enter the market and limited bargaining power of buyers means they will be reluctant to product or service switching.

4.5.3 Utility level energy management solutions

The scope of this section is to provide an overview of the market analysis for the energy management/ smart home utility tools with focus on dashboards for portfolio monitoring and management. As UtilitEE aims to offer solutions specifically to these market players, it is important to investigate the state of the market, current competitors and offerings.

Following the deregulation of the market, there are different segments to be considered in this analysis to address the tools and services for the new business roles: retailers, aggregators, energy service companies etc… Our interest is for the business roles examined in the project: Utilities as ESCOs (with focus on enriched visualization and business modes performance) and Utilities as Aggregators (with focus on DER coordination/ portfolio optimization / DSM - DR etc…).

On the other hand, a multiple viewpoint analysis is provided to address the different layers of the functionality supported by the Pilot Monitoring Application, namely: CIS market for portfolio performance monitoring, Utility Analytics services market, Demand Response Management Systems Market and Customer Engagement through DSM market.

4.5.3.1 Utility Customer Information and Relationship Management Systems This is the viewpoint of the analysis about tools to enable better management of contractual parameters with the customers. Billing/customer information system (CIS) solutions are fundamental to the electric utility industries. While legacy systems typically provide this functionality, there are modern systems available today to offer many more capabilities. In the increasingly competitive environment in which utilities operate, many will be forced to consider upgrading their systems and move to more customized and user centric solutions. Additionally, utilities’ increasing needs for effective customer engagement and the desire for integration with digital platforms, such as mobile devices, web portals, and social media, are placing a revived focus around relationship management.

D6.3 UtilitEE Market Report – First Version

The global market for CIS/CRM and customer analytics is expected to reach nearly $5.1 billion in 2018 and surpass $5.3 billion in 2019. Navigant Research expects the market to grow at a compound annual growth rate (CAGR) of 3.9% through 2027 to nearly $7.2 billion. On a cumulative basis, the global market is expected to be worth over $61.1 billion over the next decade.

Figure 33 Total Utility CIS, CRM, and Analytics Revenue by Region, World Markets: 2018- 2027 [11]

By category of expenditures, managed services (or SaaS) is expected to be the fastest growing category, increasing at a CAGR of 15.2% through 2027. Ongoing maintenance fees (typically about 20% of the original software license fee per year) are projected to account for the largest expense category as system installed grow globally.

4.5.3.2 Utility level Analytics Along with sample portfolio monitoring and management services, analytics services are typically incorporated in the platform for utilities. This is the case also for Pilot Site Monitoring Application where we incorporated sample analytics features. Therefore, a brief overview of the market for analytics services in the energy domain is provided. Globally, motivations behind the adoption of utility analytics are often driven by a multitude of factors, including local grid conditions, automation penetration, smart meter deployments, and regulatory factors among others. More specifically, the drivers for analytics services are defined (many are similar to drivers behind behavioral DSM/EMS as described prior to this section):

- Advanced metering infrastructure (AMI) data: The growing prevalence of AMI has provided valuable data for providing customers with information and feedback on consumption. Analytics may apply on streams of data to extract useful knowledge - IoT systems deployment: Similar to AMI systems, smart home devices are now massively available in the market mandating for the deployment of added value analytics services to be offered to the end customers

D6.3 UtilitEE Market Report – First Version

- Customer engagement/satisfaction: Direct communications between utilities and their customers has traditionally been limited to a monthly bill and negative events, such as power outages or unexpectedly high bills. Towards a data era, the end users are requesting for continuous and meaningful feedback and this applies also for energy utilities. - Deregulation of energy market: New business roles and models are now available in a deregulated market environment and thus it is mandatory to expand the list of service offerings. Therefore, energy analytics are required to address the market need for added value energy services.

The market forecast presented in the following figure, covering the whole market of analytics services for the different market stakeholders (DSOs, retailers, Aggregators etc…).

Figure 34 Total Utility Analytics Revenue by Region, World Markets, 2016-2025

With the focus only about DER level analytics which is the main topic examined in the project, the global market for DER management technologies is projected to reach $2.1 billion in 2025 growing at a compound annual growth rate (CAGR) of 30.0%.

4.5.3.3 Demand Response Management Systems A closer view to a specific segment of the market is provided focusing on DSM/DR management services solutions. The implementation of DSM strategies is a key point of the UtilitEE project towards the incorporation of the Utility as an Aggregator business role in the overall concept.

As the scale and complexity of demand response (DR) programs has increased over the last decade, there is a need for more centralized management and control, similar to what is done on the power electricity market. Numerous vendors have come from many different areas in the industry to offer solutions categorized as demand response management systems (DRMSs).

D6.3 UtilitEE Market Report – First Version

DRMSs allow utilities to automate and integrate multiple DSM/DR programs, including residential and commercial and industrial (C&I) programs. A DRMS manages program enrollment and customer devices, communicates real-time data, sends customer notifications and feedback, dispatches events at local or substation levels, and performs billing calculations and settlements. DRMSs integrate with a utility's advanced metering infrastructure (AMI), meter data management system (MDMS), legacy systems such as SCADA, customer information systems (CISs), customer billing data, weather data, and geographic information systems (GISs) towards providing enhanced functionality to the business stakeholders (DSM/DR Aggregators). Based on Navigant Research, by 2025 a total of $232.2 million in DRMS spending is projected around the globe. The largest amount of DRMS spending is expected to be in North America, primarily in the United States. This will hold true throughout the forecast, even though other regions have eventually started to support more DR programs.

Figure 35 DRMS Spending by Region, World Markets: 2016-2025 [14]

Complementary to demand response management services analysis (as a main pillar of services offered by the Utility dashboard in the UtilitEE project), behavioural analytics (as a means to strengthen customer engagement) DSM market is also examined.

4.5.3.4 Customer Engagement through DSM Another viewpoint of the market analysis is about the provision of customer engagement services at utility level. This analysis is closer to the domain of interest for the UtilitEE project, towards engaging portfolio customers (focus on behavioural analysis and engagement) to participate in demand side management business services.

One of the main innovations of UtilitEE is the establishment of a behavioural based energy management framework to promote energy efficiency. This is a

D6.3 UtilitEE Market Report – First Version trending topic in the last decade with behavioural DSM defined as new methods for discovering and promoting energy savings (with the potential to reduce costs either through explicit or implicit demand response programs and behavioural changes with limited impacts on comfort due to precise modelling of flexibility).

Behavioural DSM is the combination of behavioural sciences and an intuitive user experience that helps drive customers to optimize their energy consumption. Behavioural based systems tend to focus on educating consumers and encouraging individual action to achieve energy savings. Traditional analytical DSM and management systems have so far focused on finding opportunities for savings through straight forward equipment monitoring, strategic energy management, operator training, and data analytics without taking into consideration an extended array of occupant variables. UtilitEE brings a unique and novel solution to this shortcoming with automation and feedback catered to the preferences, habits and comfort boundaries of building occupants

Different types of tools & technologies have been developed to support behavioural DSM framework establishment including home energy reports (HERs), web portals, and mobile apps that provide personalized energy consumption information; social and historical comparisons of energy usage; targeted recommendations for decreasing consumption; and notifications or alerts for high bills, outages, or specific events.

The behavioural and analytical DSM market has been developing in North America for close to a decade, but it is fairly nascent in the rest of the world. Utilities in Europe and Asia Pacific have shown interest in recent years, and these regions appear poised for growth due to policy drivers and market design changes.

Overall, the widespread adoption of digital media tools has changed the way that consumers interact with service providers. Because of the changes in consumer expectations, utilities and retail suppliers are seeking demand-side management (DSM) software solutions that can lower the cost-to-serve and improve customer satisfaction and engagement.

Multiple market drivers are leading to increased utility customer engagement through DSM (CEDSM). These drivers range from changes in customer expectations to the availability of new technologies making it easier for utilities to engage customers. Drivers vary from country to country due to the competitiveness of the deregulated energy supply market in some regions.

More specifically:

- Availability of smart meter data: The growing prevalence of AMI has provided valuable data for providing customers with information and feedback on consumption. Vendors have created entire software platforms and mobile applications around AMI data to help consumers become more informed about their consumption in a personalized way.

D6.3 UtilitEE Market Report – First Version

- Electronic communications: In the energy industry, customers prefer to learn about new services and packages, changing their billing address, new energy services through digital channels like email, web portals, and mobile applications. Electronic communications—such as data communications and social media—enable the utility-customer relationship to expand through the digital channel. - Smart IoT devices penetration: Communicating and smart IoT devices (thermostats, lighting, white appliances) are an effective way to introduce DSM and energy efficiency programs to customers and, in some cases, increase customer engagement and satisfaction. - New market and business models in a deregulated market environment: Utility DSM program spending has rapidly increased the recent years. National regulations and policies put place establishing specific targets that must be met through demand side management and energy efficiency programs. Therefore, utilities will seek to generate more energy efficient savings, customized to customers’ preferences and needs. - Customer engagement/satisfaction: Direct communications between utilities and their customers has traditionally been limited to a monthly bill and negative events, such as power outages or unexpectedly high bills. This history has led to low customer satisfaction, but changes in regulations and consumer expectations have led utilities to seek solutions that can improve customer satisfaction and engagement. - Highly volatile energy cost: Market forecasts about energy prices show that the price for energy/electricity will be increasing and highly volatile in the following years. Therefore, it is of high interest for the customers to get engaged in DSM programmes.

Although some of these concepts have been around for 10 or more years, concerns exist about the performance and results of these solutions. Utilities willing or required to invest in DSM programs are unsure about long-term effects and how customers will take to these technologies. In addition, customer engagement programs do not always receive the energy savings credit for increasing participation in other programs, making it harder to quantify their benefits. The greatest barrier to increased customer engagement is the uncertainty around whether it will cost-effectively reduce churn and increase customer retention in deregulated markets.

The expectation about the size of the market in 2018 is about $270.5 million to be spend on CEDSM on a global basis. As presented in the following figure, growth is expected to be relatively robust during the forecast. By 2027, a total of $1.1 billion in spending around the globe is anticipated.

D6.3 UtilitEE Market Report – First Version

Figure 36 Customer Engagement DSM Spending by Region

Note: The last segment of the analysis covers the different layers of the behavioural engagement framework: tools for the utilities (direct stakeholders) to manage DSM strategies (Pilot Site Monitoring Application) but also tools for the end customers (Behavioural Engagement App) on the way to ensure that portfolio customers are actively engaged in DSM programs.

4.5.3.5 Competitive Assessment In order to perform a competitive assessment of the utility solutions market environment we have performed a Porter´s 5 forces analysis. This assessment was performed taking into consideration smart home and IoT solutions within the energy management segment and specifically catered towards Utilities as explored above. The following figure and table illustrate the current assessments.

D6.3 UtilitEE Market Report – First Version

Threat of new entrants 5 4 3 2 1 Bargaining power Bargaining power 0 of suppliers of buyers

Threat of substitute products Figure 37 Porter´s 5 forces diagram Utility Solutions

PORTER´S COMPETITIVE RATING [1-5] DRIVERS FORCE  Lower cost solutions offered by under-the-radar competitors i.e. technology giants like Apple, Google  Integrated solutions offering not only energy management functions but overall smart home/ building functionality and automation functions, THREAT OF NEW directly targeting millennials. 4 ENTRANTS  Solutions being offered are still at a growth stage in the product life cycle meaning new entrants are likely.  Deregulation of energy markets means more players and smaller utilities can enter niche areas and offer niche services based on similar technological foundations

 The wealth of products available in the market increases the bargaining power of customers. However, traditional building managers are keen to BARGAINING prefer vertical solutions offered by established POWER OF 4 market players based on market memory. BUYERS  Although many products are available for many utilities and companies they still represent a miniscule portion of revenue at this stage meaning they are less susceptible to buyer pressure.

 Substitute products may be cheap enough and progressively penetrate and dominate the market THREAT OF due to the current trend in smart home/ building SUBSTITUTE 4 demand PRODUCTS  Utilities could integrate vertically and develop their own software suites.

BARGAINING 3  IoT hardware and network infrastructure as well as

D6.3 UtilitEE Market Report – First Version

POWER OF cloud providers despite being a fast developing SUPPLIERS market are still clustered into a rather concentrated number of larger players dominating the market.  Outsourced components and products are of a simple nature and widely available. Table 13 Porter´s 5 forces analysis Utility Solutions

As expected for a market that is in its growth stage, the utilities solutions market is a highly competitive market with a mix of young novel companies facing more established companies from parallel markets such as Opower, Siemens and Honeywell. The breadth of available products leads to high levels of bargaining power for the buyers with widely available substitute products. The next section will provide a foundation for effectively positioning the product offering as we will produce a competitor listing and mapping over the coming deliverables.

4.6 Concluding remarks

The preceding sections have provide the UtilitEE consortium with insights on the most active markets from the perspective of ESCOs and energy efficiency, DSM and DR markets and relevant product and service markets with the analysis of the smart home, smart building and utility level energy management systems markets.

In terms of the ESCO and DR markets which correspond to the principle service markets envisioned by the business models established in D1.2, we have identified the member states offering the best market conditions respectively for both segments.

Germany, France, Italy, the United Kingdom and Spain are countries with the highest number of ESCO companies, EPC providers and market size. These countries could be considered as preferable target markets for UtilitEE future commercialization.

Finland, France, Belgium, the United Kingdom and Ireland are ranked as the most commercially active countries from the point of view of DSM and DR markets.

In terms of the direct entry product markets, namely the smart home and buildings energy management segment as well as utility level products and services, the UtilitEE consortium is faced with markets that are forecast to grow at exceptional rates with the booming smart home and IoT markets receiving an incremental 25% of market value per year until 2020. In terms of competitive assessments and Porter 5 forces scores, the HEMS market received an average of 4.5, the BEMS market a 3.25 and the Utility energy management solutions market a 3.75. These disparities in between markets are partially explained by the fact that BEMS can be installed on already existing infrastructure of BACS favouring the dominance of already established market players limiting the threat of new entrants and substitute products. In contradiction to this, the HEMS market and utility solutions market are closer to being blank slates, at a

D6.3 UtilitEE Market Report – First Version growth stage in terms of product life cycles, and thus fostering a highly competitive environment with the possibility for new substitute products to appear and new competitors to enter the market. For the UtilitEE project, easier entry into the market means higher levels of competition once operating in the market which means that competitive advantages of the UtilitEE products and services will have to be effectively identified in order to compete and succeed.

For this reason, the next section of this deliverable will focus on providing a preliminary overview of competing products and technologies in the market. The objective will be to later assess the key features of all respective products and services, as determined by the methodology in section 3 of this deliverable, and rank competitor offerings as well as UtilitEE offerings in order to obtain an extremely clear picture of how to position the exploitable assets for commercial success.

D6.3 UtilitEE Market Report – First Version

5 Technology evaluation & Competition Analysis

5.1 Competitor product analysis (listing and mapping)

In order to properly understand where UtilitEE exceeds the functionalities of its relevant or tangent competitors, it is important to perform a technology evaluation of the available relevant products and services on the market. This task will be initiated in this deliverable with more detailed contributions that will be provided in the oncoming 2nd market report. The main competitors for the exploitable assets are presented in the following sections.

5.1.1 Sensing and Information Management Layer The bottom level of the UtilitEE System (Sensing and Data Management Layer) collects all necessary building information through smart meters, gateways and sensors deployed for monitoring ambient/ hygienic conditions and energy consumption data. Live information streams captured from low-cost low-power off-the-shelf meters (plugs, clamps) and sensors, will be continuously processed and analysed by an intelligent infusion engine. Building gateways (incorporating also In-Home Displays – IHDs) will accommodate secure access to all major types of off-the-shelf sensors through standardized communication protocols (e.g. ZigBee, Z-wave).

As mentioned in the GA, one of the main innovations in the proposed framework is to provide a customizable gateway that can easily integrate with existing off the shelf-hardware components (sensors, actuators, metering units) to enable the provision of energy services (monitoring, control and automation).

The list of the main EU competitors is presented in the following table.

COMPETITOR DESCRIPTION OF PRODUCT OFFERING AND STATE OF TECHNOLOGY ZIPATO Z-wave based gateway with open API- Supports Zigbee- Croatian based company ATHOM A multi-protocol gateway to integrate with several hardware devices – NL based company HOMECONTROL Z-wave based gateway with open API- Supports also additional protocols- Norwegian based company DEVELCO Z-wave based gateway with open API- Supports Zigbee- DK based company ROCKETHOME A framework and software product acting as a gateway to address several use cases spanning from Home Control, Home energy & Home Monitoring: Different commercially available products are based on this middleware: DE based company FIBAR GROUP Z-wave based gateway with open API- PL based company DIGITALSTROM A hardware and software solution providing home and energy management services- DE based company NEXIA HOME Z-wave based gateway with open API- BE based company Table 14 Smart home gateway competitors

It is clear that we are not taking into account as part of the analysis the large vendors (either industry based e.g. Schneider or cloud based e.g. amazon, google) that are leading the development of enterprise-based applications.

D6.3 UtilitEE Market Report – First Version

5.1.2 Enhanced Performance Rating Analytics UtilitEE´s enhanced performance rating analytics offers an interface based on Enhanced Display Energy Certificates (eDECs) combining real time building performance data with more personalized inputs such as activity clocks and dashboards offering the users the possibilities to exploit information in order to single out energy wasteful and energy intense behaviours as well as receive personalized feedback on how to improve the latter. In this instance, the most direct competitors are companies and products within the energy management services space offering energy consumption monitoring and feedback services. The list of competitors at identified at this stage comprises the following:

COMPETITOR DESCRIPTION OF PRODUCT OFFERING AND STATE OF TECHNOLOGY SMAPPEE Energy monitor with disaggregation features- raw UI Energy monitoring with enhanced UI, process raw data with prices, triggers to EFERGY the end users IOD available Energy monitoring with enhanced UI, process raw data with prices, incorporates CURRENTCOST also weather data IOD available SENSE Monitor with disaggregation features- raw UI Loop Energy Saver tracks energy consumption against all the best tariffs on the LOOP market- raw UI with simple analytics Energy monitoring with enhanced UI, process raw data with prices, triggers to OWL ENERGY the end users IOD available Energy monitoring through different displays: In-home displays, smart phone GEO apps and web services. Integration with home automation equipment Energy monitor to make smarter decisions about energy use, recognize CURB abnormal patterns of energy use, pointing to potential problems of various appliances, estimate energy bill. Spanish based company providing energy disaggregation and enhanced energy MIRUBEE analytics Table 15 Energy Dashboards/eDECS competitors

5.1.3 Home/building automation service providers/ Energy management solutions The phrase Building Energy Management Systems (BEMS) is sometimes used interchangeably with building automation and control systems, however, as seen in the previous section BEMS deal specifically with energy consumption, metering, and so on. The same is relevant for home automation systems and solutions specifically catered towards energy management.

Considering the scope of the UtilitEE project, we will focus our attention on BEMS and HEMS competitors.

In terms of competitors, the BEMs market is composed of the following main set of players:

DESCRIPTION OF PRODUCT PRICING INTERVALS COMPETITOR OFFERING AND STATE OF TECHNOLOGY StruxureWare Building Operation Dependent on the size of SCHNEIDER / software provides integrated the building: STRUXURE WARE monitoring, control and management From €25/ m2 for small- of energy, HVAC, lighting and fire sized buildings down to safety. It is a centralized system with €10/ m2 for very large scalability from a single building to a ones

D6.3 UtilitEE Market Report – First Version

global enterprise. Comprehensive energy and operational Dependent on the size of SIEMENS / NAVIGATOR performance platform that the building: encompasses both energy supply and From €25/ m2 for small- demand analyses, going beyond energy sized buildings down to management into key building €10/ m2 for very large analytics. ones The management system is efficiently centralized in the Desigo interface. Automation and control encompasses big data and historical logs. Nevertheless, the focus here is mainly on ad hoc current optimization of energy consumption with no energy simulation for alternate scenarios or retrofit solutions. Company offering products and Dependent on the size of JOHNSON CONTROLS´ / services to optimize energy and the building: PANOPTIX operational efficiencies of buildings From €25/ m2 for small- sized buildings down to €10/ m2 for very large ones Cloud-based, integrated platform, Dependent on the size of VERISAE / VX CONNECT comes from correlating business the building: information, people, processes, and From €25/ m2 for small- analytics across traditionally sized buildings down to disconnected operations. Supports €10/ m2 for very large maintenance management, energy ones management, mobile workforce, remote asset management, etc. vx Connect is specifically focused on providing a SaaS solution with centralized metrics historical logs to leverage the power of big data in facilities management. The software has the ability of establishing relationships and correlations between factors that are not easily identifiable. Moreover, attention is paid to retrofitting in this case. Gives facilities managers and real Dependent on the size of IBM SMARTER estate executives the tools to better the building: BUILDING / TRIRIGA manage facility energy and space From €25/ m2 for small- utilization, reduce operating costs, and sized buildings down to prepare for new lease accounting €10/ m2 for very large standards. ones This BEMS system and interface principally focuses on optimizing energy consumption by matching use levels to the actual space being used in a building encompassing behavioral aspects. EnerNOC is among the largest N/A ENERNOC providers of energy intelligence software and services for commercial, institutional, and industrial customers, as well as electric power grid operators and utilities. Predictive energy optimization to From €25/ m2 for small- BUILDING IQ automatically tune and control HVAC sized buildings down to systems. €10/ m2 for very large ones The BEMS organizes itself in 3 layers with a focus on HVAC: building

D6.3 UtilitEE Market Report – First Version

operations, measurement & forecasting and predictive control focused on demand response potential through HVAC control. Table 16 BEMS competitors

As seen by in the previous table, pricing for BEMS systems is homogenous across the market. Of course, these price per square meter levels are estimates and subject to small variations. Nevertheless, the BEMS industry is not ruled by fixed pricing policies and it is dependent on project variables such as building size, customer requests and the like. Nevertheless, considering the average required ROI levels on energy efficient and energy management investments that currently characterize the market, it is possible to come to these estimates.

In terms of home automation and HEMS competitors, the following competitors have been identified so far:

DESCRIPTION OF PRODUCT OFFERING PRICING COMPETITOR AND STATE OF TECHNOLOGY INTERVALS Home automation and control system with 1000-1200€ HOMESEER energy management functions based on Insteon, UPB, Wi-Fi, X10, PLC-BUS, ModBus, Z-wave protocols. Transmission is wired and wireless. Home automation and control system with 1300€ QIVICON energy management functions based on Wi- Fi, ZigBee protocols. Transmission is wireless. Home automation and control system with 1250€ LOXONE energy management functions based on KNX, DMX, ModBus, RS232, RS485, EnOcean, Loxone Air protocols. Transmission is wired and wireless. Home automation and control system with 900€ DOMINTELL energy management functions based on S- Bus protocols. Transmission is wired. Table 17 HEMS competitors

5.1.4 Utility level energy management platform market place Following the high-level market framework for the utility level services as presented in the relevant section of the general market overview, a more thorough research on the market environment is provided to report the state of competition in the market. Following the segments, the competition analysis is performed and the key players in the market are presented:

SERVICE/PLATFORM TYPE COMPETITORS UTILITY CUSTOMER INFORMATION AND  ABB RELATIONSHIP MANAGEMENT SYSTEMS  SAP  Oracle  IBM  Itron  Landys  Microsoft  Aclara  Dexma UTILITY LEVEL ANALYTICS  SAS  SAP

D6.3 UtilitEE Market Report – First Version

 Teradata  Spacetime insights  IBM  Itron  Oracle  Siemens  Opower  OSISoft  ABB UTILITY LEVEL DEMAND RESPONSE  ABB MANAGEMENT SYSTEMS (EXPLICIT DEMAND  Autogrid RESPONSE PROGRAMS)  Comverge  Honeywell  Siemens  EnergyHub  Enbala  Enernoc  Restore Cybergrid  Tendril  Whisker Labs BEHAVIOURAL/ CUSTOMER ENGAGEMENT  Bidgely (IMPLICIT DEMAND RESPONSE PROGRAMS)  Comverge  Ecobee  EnergyHub  Onzo  Opower  Smappee  Tendril  Whisker Labs Table 18 Utility level competition analysis

Some notes about the competition analysis and lead competitors in the market is required:

- A high-level segmentation of the main competitors is to: (a) major venders/ conglomerates providing vertical solutions for different types of services (b) software vendors providing customized solutions and focusing on a specific functionality and service offering - It is evident that the major vendors in the market are participating with services at the different segments/ pillars as presented above. - Most of the companies are mainly coming from the US as the energy market and the market for energy services is open for some years. In Europe, there are some companies active in the market but still there is an open field for investment considering the ongoing transformation of energy market (transition to a fully deregulated market environment with active participation of multiple stakeholders).

Comparative analysis

Being one of the key areas of exploitation for the UtilitEE project consolidated product/service offering for utilities which is the core objective, we have performed an initial comparative analysis of the UtilitEE solution in relation to what exists on the market with respect to solutions and products for utilities. This exercise will be performed in the forthcoming iterations of the market report for all listed market environments.

D6.3 UtilitEE Market Report – First Version

Following the presentation of the main vendors in the market, a comparative analysis with the UtilitEE Pilot Site Monitoring Application is provided to show the innovation potential and added value of the dashboard/tool developed in the project. For this analysis, we consider products and service offerings closer to the core of the functionality offered by UtilitEE Pilot Site Monitoring Application, namely: Demand Response Management services; Behavioural/ Customer Engagement.

The way this is performed is to first provide a description of previously identified competitor solutions with their respective key feature and benefits as follows:

 Utility Demand Response Systems/Services comparative analysis (explicit DR):

COMPETITOR DESCRIPTION OF PRODUCT OFFERING AND STATE OF KEY FEATURES TECHNOLOGY ABB Demand Response Management System (DRMS) Key Features DRMS enables the program design, planning, optimization, dispatch, - Demand Response program management measurement & verification, and settlement of distributed and - Distributed generation and demand response capacity demand side resources. Demand response program participants and forecasting distributed generation assets are aggregated into Virtual Power Plants - Virtual Power Plant (VPP) optimization and dispatch (VPPs) for capacity forecasting, dispatch optimization, and energy or - DR measurement and verification (M&V) ancillary service market participation. Resources can be dispatched to - Systems and hardware provider with software layer address supply shortages, reduce energy imbalances, take advantage of profit opportunities, minimize peak transmission fees or for fine- Key Benefits grained, surgical relief of overloaded network resources. - Management and dispatch of multiple DR programs including direct load control and voluntary pricing programs - Optimization and dispatch of complex portfolios including traditional and renewable distributed generation, storage, and curtailable load - Fine grained forecasts and dispatch of distributed energy resources to support transmission and distribution grid load relief AUTOGRID Demand Management, Distributed Power, And Virtual Power Plants - Exclusively a software company There is a lot of disruption going on and this is being led by nimble - Focuses at both supply and demand ends of the young companies whose business model involves information electricity production/retail value chain in order to management. A good example of this emerging area is Californian provide a holistic framework for grid optimization. company AutoGrid Systems. AutoGrid is an unusual player as it is a pure software provider. Being hardware agnostic it has focused on quality data acquisition, manipulation and providing solutions for large scale distributed applications. The scale of what AutoGrid takes on is interesting. An example is a project with Eneco, a major Dutch sustainable energy company with 53 municipalities as shareholders. The project with Eneco involves managing 100 MW of flexible capacity for Dutch greenhouse farmers. By smart management of power generation and usage, this project has avoided the need for a gas peaker plant.

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 768600

D6.3 UtilitEE Market Report – First Version

Another AutoGrid project involving delay/avoidance of investment in gas peaker plant is a successful 18MW demand response demonstration projectwith Energy Northwest and Bonneville Power Administration. AutoGrid has just announced an integrated optimization system, AutoGrid Flex 3.0. This suite of software involves three elements : i) demand response management, ii) managing distributed energy resources and iii) organizing VPPs. The pitch to customers (utilities, electricity retailers, renewable energy project developers) is that AutoGrid provides an additional value layer on top of the renewable energy resources. The AutoGrid software enables prediction, optimization and control of distributed energy resources in real time. The focus is technology agnostic, so there are substantial projects in wind, solar, batteries and well as CHP plants. Key features are : Local site optimization : This results in reduced site-based demand, lower peak system charges, energy cost saving and local balancing; these all enhance renewable energy project ROI. Storage integration with other distributed energy resources : AutoGrid provides integration of various hardware sources making customer management easier and more efficient. Portfolio optimization : This enables optimized aggregation/disaggregation and planning of dispatch for various energy generation and storage devices. This is particularly relevant to VPP applications. AutoGrid has massive scalability. SIEMENS Demand Response Management System (DRMS) - Traditional large vendor DR services/software and Siemens DRMS Version 2.0 hardware offerings with incremental levels of Description automation and control. Siemens Demand Response Management System (DRMS) is a proven software platform that allows utilities to manage all aspects of their demand response (DR) programs through a single, integrated system. DRMS solves the challenge of creating an automated, integrated, and flexible demand response solution: DR capacity can be scaled in a cost effective manner by automating the manual processes that are typically used to execute DR events and settlement. DRMS can be fully integrated with utility systems to leverage investments in Smart Grid technology.

D6.3 UtilitEE Market Report – First Version

DR resources can be used in a more intelligent and efficient way by planning and executing load shed at grid locations where the utility has more benefit. ENBALA Distributed Energy Resource Management Systems (DERMS). Key Capabilities of the DERMS Solution Built on the Enbala Engine Distributed energy balancing platform, the • Resource dispatch on-demand or at configurable time DERMS solution uses a real-time communications infrastructure to periods monitor, control, coordinate and manage energy assets connected to • Robust optimization engine that can calculate results your utility. Opening new doors for optimization of your distributed every two seconds to respond to the most demanding energy assets, the DERMS solution gives you better control of a wide grid services range of equipment, including smart inverters and customer loads. It • What-if analysis data for use by grid operators or also helps you maintain the health and reliability of your network. The distribution management systems result? The portfolio built with these aggregated assets becomes a • Resiliency in case communication is interrupted single dispatchable resource that you can use for localized voltage • Rebound management to prevent unwanted increases support and grid services, such as operating reserves or regulation. in demand after load-reduction events You’ll gain more manageable, less disruptive renewable integration, • Asset and network forecasting and you can provide a way for your customers to achieve more value • Ability to provide multiple grid services from distributed energy investments by participating in wholesale simultaneously, using the same distributed equipment markets. • Easy Integration with distribution management systems to lower O&M costs by using distributed resources for voltage control ENERNOC With the arrival of more dynamic pricing in energy markets, EnerNOC EnerNOC puts its focus on the commercial and industrial provides businesses and industrial customers with breakdowns of the markets with a focus on internal processes optimization best prices they can obtain in consideration with their needs. rather than aggregating residential users. The software Moreover, they include demand response programs for these focuses mainly on the analysis of variable energy prices customers.With the arrival of more dynamic pricing in energy markets, and optimizing company activities around these prices EnerNOC provides businesses and industrial customers with according to machine learning algorithms breakdowns of the best prices they can obtain in consideration with their needs. Moreover, they include demand response programs for these customers. RESTORE REstore's Automated Demand Response (ADR) solution allows utilities Balancing in real-time: to grow new innovative downstream activities in Demand Side To help utilities tackle real-time imbalances from Management, deploying DR programmes across their C&I customers intermittent renewables, FlexPond delivers clean to build and monetize clean virtual power plants "built" from the demand response capacity by focusing on pure demand- demand-side. side resources rather than on polluting, inefficient diesel Utilities' needs in DR generators. REstore’s FlexPond solution allows energy utilities to effectively engage with their C&I consumers on demand response. Delivering reliability: FlexPond creates clean Virtual Power Plants that enable utilities to During a power curtailment request, FlexPond enables

D6.3 UtilitEE Market Report – First Version

balance their BRP portfolio or bid into reserve markets, ranging from real-time replacement of a flexible machine by another capacity markets over tertiary reserve all the way up to primary factory in the same portfolio ensuring an accurate, reserve - where the most value resides. continuous and reliable delivery of the requested energy. Bringing the Internet-of-Things to life FlexPond™ connects to thousands of sensors in factories and buildings over the Internet so that at any point in time utilities will know exactly the amount of flexible power they have at their disposal. CYBERGRID Remotely manages and optimizes electricity consumption across a - High levels of automation etc... network of industrial, commercial and institutional customer sites. The main innovation is the data analytics platform that analyses real time and historical information towards the selections of optimal DR strategies for their customers. HONEYWELL Demand response programs from your utility can give you the option Traditional DR solution with extensive offerings in to reduce your energy usage during high demand in exchange for software and hardware layers. incentives such as bill credits or rebates. Honeywell have an extensive potfolio of products in Before: Based on energy use patterns and weather forecasts, your sensoring, monitoring, controling and automation that utility company can predict when it will be most expensive to provide they can beenfit from for the deployment of this power. Sometimes, it’s actually less expensive for utilities to pay solutions. customers to cut down on their usage than to produce or buy the electricity. When that happens, customers who have enrolled in the program are notified of the upcoming demand response event. Your house may even be automatically pre-cooled right before the peak so your system can work less during the peak. During: The temperature or cycling rate of your system may be adjusted to reduce energy. After: Your home goes back to being cooled normally. Possibilities are offered for opting out during DR event. Table 19 Demand Response Systems for Utilities

 Behavioural / Customer Engagement comparative analysis (implicit DR and EE):

COMPETITOR DESCRIPTION OF PRODUCT OFFERING AND STATE OF KEY FEATURES TECHNOLOGY

D6.3 UtilitEE Market Report – First Version

BIDGELY Startup working on energy disaggregation and customer profiling. - Disaggregation is performed without any sensors Bridgely´s leading customer engagement platform allows energy and solely using meters. This means the potential distributors and retailers to increase customer satisfaction and meet target market and homes/buildings that can use the energy efficiency goals. solution is extended as there is no need for more Disaggregation in this case is the ability to completely complex sensor installations (especially since even compartmentalize energy consumption of a customer among the analog meters are used) different appliances in use at his premises. The technology is capable of - No control or automation offered in this solution. The itemizing energy consumption down to the household system and focus is on providing insights and solutions for energy appliance level, using only data collected from hourly or 15-minute efficiency. smart meter data.This then enables the most optimal demand response - Type of demand response in question is exclusively strategies. This service is provided to utilities so that they can offer this implicit. type of itemization and demand side management to their own end users. Bidgely performs its disaggregation through meter data alone. This eliminates the reliance on expensive hardware sensors or for the customer to install anything in their home. Using machine learning algorithms, Bidgely’s patented energy disaggregation technology detects and extracts appliance fingerprints from smart meter data. The data is converted into itemised energy bills and useful insights. Leveraging a database of over 50B meter readings from smart meters, Bidgely’s machine learning models extend itemisation to non Smart Meter homes using a “matched peer” or a “matched region” approach. ECOBEE Ecobee offers a portfolio of smart devices, thermostats and sensors - System relies on sensors, switches etc... focused on residential use for optimizing energy use and comfort. Free - Disaggregation and itemization is not very detailed energy reports give you insights on how much you’ve saved based on and reports and insightsare mainly focused on heating run times and offer tips for further savings. and cooling equipment - Offers automation and control ONZO Uses energy data to enhance consumer insights for the utility. ONZO - Itemization is based on smart meters provides a SaaS medium through which utilities can engage their - No control or automation offered in this solution. The customers, with capability to select and target message content to focus is on providing insights and solutions for energy individuals, while providing useful information to the home owner about efficiency. their energy use. Customers receive information that educates and - Type of demand response in question is mainly informs them about their existing use and notifies them of changes to implicit but helps recognize potential participants in provide: Control, Comfort & Convenience. explicit programs for utilities.

D6.3 UtilitEE Market Report – First Version

OPOWER/ORACLE Customer enegagement solution for utilities to engage customers and - Disaggregation is performed without any sensors obtain more insight on DSM data. Opower’s algorithm delivers usage and solely using meters. This means the potential data (with or without a smart meter) target market and homes/buildings that can use the The algorithm supplies a personalised breakdown of a customer's solution is extended as there is no need for more energy use into categories such as HVAC, appliances and hot water, complex sensor installations (especially since even which Opower says works reliably for customers with traditional energy analog meters are used) meters. - No control or automation offered in this solution. The Data analytics involve a strategic combination of data on historical focus is on providing insights and solutions for energy energy consumption, weather patterns, household characteristics, user efficiency. input, and other key variables. - Type of demand response in question is mainly implicit. SMAPPEE Smappee offers utilities and end users complete insight into the energy - Disaggregation and itemization through submetering consumption of appliances or group of appliances using Smappee Plus using either clamps in the fusebox, switches or NILM and Pro for accurate submetering by installing clamps in the fusebox or technology which is a clamp that attaches to a cable. connect a Smappee Switch to a specific appliance. Smappee also - No control or automation offered in this solution. The identifies certain household appliances via its unique patented NILM focus is on providing insights and solutions for energy technology or load disaggregation technology. efficiency. - Type of demand response in question is mainly implicit. Table 20 Behavioural / Customer Engagement comparative analysis

 Vendors participating in both segments:

COMPETITOR DESCRIPTION OF PRODUCT OFFERING AND STATE OF KEY FEATURES TECHNOLOGY COMVERGE - DR with focus on offering possibilities for utilities to Load Research Services stimulate renewables integration. Itron’s Consulting and Analysis (C&A) group has a successful - Software based solution with native apps for iOS and history of providing its clients with insights related to energy use Android (remote management/control) by customers through load research services. C&A offers support - Explicit demand response related to load research design and implementation, analysis of - Possibility to override demand response events for hourly and monthly electric and gas loads, rate design based on more choice and control load research data, cost allocation factors for rate cases, and - Focus is on explicit DR monitoring load patterns of demand side and supply-side technologies. Itron’s SiteProTM end-use load shape tool, which is based on national and regional energy use data and uses DOE 2 for the simulation of HVAC energy, can also be utilized to develop end-use load shapes. It can be used in conjunction with load

D6.3 UtilitEE Market Report – First Version

research data, or used independently, to provide shapes for the residential, commercial, and industrial sectors. ENERGYHUB Utilities use the Mercury distributed energy resource management - Offers unequaled compatibility with current smart system DERMS to manage a diverse range of brands and device devices and DERs in market for wider and easier classes through a single contract with EnergyHub, allowing adoption. distributed energy resources to be deployed and managed - Ability to provide insights for customers. anywhere from the substation to behind-the-meter. It produces - Based on leveraging currently deployed smart smart, simple and cost-effective energy management tools that devices from different vendors. strengthen the relationship between consumers and utilities and - DR is both explicit and implicit through insights solve energy problems. The platform offered through EnergyHub enables small residential players to quickly implement demand response programs. Indeed, it connects utilities to all Distributed Energy Resources partners involved. Legacy DERMS are unlikely to have the ability to respond to the proliferation and complexity of customer-sited DERs. Those DERMS, which were derived from early ADMS or low-tech DRMS software, lack the agility and flexibility needed to respond to greater penetration of DERs as the grid evolves. TENDRIL Provides cloud platform to energy service providers for their - Tendril is originally catered to end users with smart energy management applications. Tendril enables utilities to drive meters and AMR/AMI networks. Nevertheless, their customer engagement via rich and tailored experience for the new version (Energize) has expanded to all kinds of home energy consumer. meters. Tendril provides 2 main platforms in the name of Orchestrated - Focus is on explicit demand response and Energy and Myhome. Orchestrated energy focuses on demand aggregation. side management for the residential sector by aggregating many residences and providing demand response services that encapsulate comfort preferences of each individual residence. On the other hand, Myhome is a cloud based energy management application for home owners which has particular emphasis on providing an immediate estimate of energy costs according to systems configurations. Myhome only does this through gross estimates emanating from customer inputs in terms of the size, age and systems of a home.

D6.3 UtilitEE Market Report – First Version

WHISKER LABS Through a portfolio of sensors, provide utiliities with the - Disaggregation and itemization through only one possibility to intelligently manage peak load to stabilize the grid sensor installed in breaker box. and manage operations. Whisker Labs applies thermodynamics to - Focus is on explicit demand response and understand how energy flows within a home and can shed more aggregation. load and keep consumers comfortable, which limits opt-outs, increasing event participation. The Connected Savings Intelligence℠. DRMS aggregates multiple devices, offers end-to-end DR event management, supports BYOT, direct install, and TOU programs, and provides insights for improved decision-making. Table 21 Vertical vendors comparative analysis

D6.3 UtilitEE Market Report – First Version

- The following section builds upon the previous table where competitors have been characterized in terms of their main business models as well as certain technical details by identifying the recurring trends and tradeoffs that exist for each segment in terms of features and how the UtilitEE project stacks up to these. UtilitEE and demand response service/systems competitors (explicit DR)

When going over the features of these relevant competitors, it is possible to identify certain trends, overlaps in benefits, features and offerings by competitors. In terms of utility demand response systems, focus is still maintained on large stakeholders such as industrial production entities or large commercial buildings with little attention given to occupants and modelling of comfort preferences. Software programs associated to this segment possess an upstream focus for grid optimization at the benefit of energy retailers/producers without paying attention to more qualitative variables (comfort, behaviour…) of energy consumption that affect end users´ utility. This one sided approach means that smaller sized end users within an aggregated framework are more likely to opt out jeopardizing their potential as DR contributors. For this very reason, current demand response services and systems are still heavily biased towards larger contracts. UtilitEE brings added value with regard to this since the framework encompasses behavioural variables of end users while also providing the automation features of explicit demand programs (shutting down heating and cooling, etc.) without jeopardizing building occupant comfort. Therefore, in comparison to current large players, UtilitEE could become a leading solution for utilities and retailers to develop DR activities and services among smaller players with aggregation.

Key attributes of UtilitEE with respect to this segment:

o Addition of downstream behavioural focus with the integration of explicit DR potential compared to the traditional upstream approach and grid optimization. o Possibility for integrating smaller end users with more effective and reliable aggregation

- UtilitEE and behavioural/customer engagement competitors (EE and implicit DR)

The main objective of the players within this segment is the capability of itemizing or disaggregating energy consumption information into different systems and appliances in order to give detailed insights for higher levels of energy efficiency and implicit demand response approaches. In order to do this, different approaches and methods are used; namely the use of smart and/or analog meters combined with ancillary relevant data and inputs or the use of sensors/clamps/switches. The obvious tradeoffs that exist between different approaches is the precision of gathered information vs the ease of implementing

D6.3 UtilitEE Market Report – First Version and integrating the system/solution. Acquiring data from clamps and sensors provides precise information on energy consumption of appliances and systems.

Generally, competitors in this space are focused on providing insights without any automation that would result from comfort set points or other behavioural thresholds. Nevertheless, users often have remote control over systems and can set their own triggers for system operation or shutdown according to available variables such as temperature, lighting and differentials.

UtilitEE brings added value to this sector in many regards. The disaggregation process in question for the creation of a behavioural energy profile for occupants is performed via the implementation of sensors. Nevertheless, the implementation of such sensors is made easier since the dashboard that is being developed is meant to be compatible with a wide variety of off the shelf sensors and components whereas most of the listed competitors such as Ecobee and SMAPPEE work with their own set of sensors. Moreover, UtilitEE is set to provide automation features for heating and cooling for instance based on triggers that are established through the behavioural profiles.

Key attributes of UtilitEE with respect to this segment:

o Precision of sensor based approach while guaranteeing ease of implementation and adoption o Application of disaggregation and behavioural approaches that go beyond simple insights/reports and tips for energy efficiency (and implicit DR optimization) with the integration of automation and explicit DR.

- Vertical vendors officiating in both segments

Officiating in both segments is a reflection of where the market is going in the future and where UtilitEE project results should position themselves in the future (Utility as an ESCO/ Utility as a DR Aggregator). The innovation in this case is bringing behavioural insights to more automated explicit demand response activities with aggregation of small energy user loads.

One of the differentiating factors in this market is once again the data source for processing and disaggregation. Some players base their analysis on smart and analog meters while others focus on sensors and switches. Innovative solutions such as a unique sensor in the break box are also employed. Other solutions focus on compatibility with off the shelf sensors such as Energyhub, similar to the UtilitEE project and increasing potential for market uptake.

This market space is also characterized by high levels of control and automation. Apps are available for remote shutdown of systems and opting out of DR events.

Amongst these competitors, UtilitEE seems to offer the best mix of all approaches and solutions. Indeed, the superior levels of hardware and sensor

D6.3 UtilitEE Market Report – First Version compatibility offered by Energyhub are also prevalent leading to easier implementation and precise data. Nevertheless, UtilitEE´s behavioural approach and profile is more granular. Most described competitors offer traditional disaggregation of appliances and systems in terms of simple energy consumption while UtilitEE offers an additional layer. After load identification and consumption quantification, energy consumption is linked to ongoing activities that may include domestic activities or business activities with the provision of customized, fine-grained, detailed information on energy behaviours of activities performed by occupants, rather than presenting mere energy data. Therefore, flexibility, trade-off levels and utility curves of occupants in terms of differed energy consumption are modelled more precisely making DR events less intrusive and limiting opt outs.

Key attributes of UtilitEE with respect to this segment:

o More data granularity with provision of Human Centric Energy Behaviour Profiles with characterized activities on top of common itemization (additional analytical layer for triggering behavioural change)

The features of UtilitEE have been compared with products that are currently available in the market and their key attributes and value proposition have been identified. As a result of this process, a SWOT analysis is offered as a synthesis of the conclusions delivered by the comparative analysis performed in the prior section. It provides insight on comparative advantages and possible drawbacks of our product architecture in relation to what is available on the market for utilities in terms of customer engagement and demand response as well as hybrid platforms.

Weaknesses Strengths - Not as immediate as smart - High levels of data granularity and meter and analog meter based precision combined with solutions unprecedented ease of adoption - 3 years before being taken to and implementation by the use of market in a highly active and compatible off the shelf hardware morphing segment where basic implements. requirements and standards are - Unprecedented behavioural not set. insights with an additional layer of - Unknown brand name against behavioural profiling and activities certain large corporations and compared to the basic appliance players. and system consumption

disaggregation. - Better modelling of utility curves, demand flexibility and occupant comfort for less intrusive DR events. - Possibilities for automation and controls moving beyond simple reports and insights. Threats Opportunities - Limited investment capacity in - Advent of smart building some EU Member States due to technologies and change in the the economic recession mentality of consumers - Since the precise segment in

D6.3 UtilitEE Market Report – First Version

- Increased need for energy which UtilitEE will position itself optimization is in constant transformation - High growth potential of the smart with a mix of small and large controls market/BEMS players, there is constant threat - High importance given to human- of new entry by centric solutions products/substitutes/technologie - Need for utilities to reinvent s/actors. themselves - The market is characterized by clear expectations in terms of ROI in building energy efficient implements (3-5 years) meaning that UtilitEE will have to price itself accordingly. Table 22 SWOT analysis for the UtilitEE solution

Down the line and specifically within activities related to the technology assessment, more detailed comparative analyses of every market environment will be offered with its respective SWOT. Such tasks will result in positive feedback loops with task 6.1 and task 6.3 bringing insight on how project results should be positioned and launched in the market according to their advantages over existing solutions.

D6.3 UtilitEE Market Report – First Version

6 Conclusion

6.1 Summary of achievements

As a result of the work developed within Deliverable 6.3, the following main achievements and progress are highlighted as part of the Market Analysis Report – First Version:

 Overview of Task methodology  Analysis of utilities market and future market challenges and requirements for adaptation  Analysis of ESCO and building energy efficiency sectors at the European (regulatory) and member state level  Analysis of demand response and aggregator market at the European (regulatory) and member state level with market openness assessments.  Consolidation of ESCO/energy efficiency market analysis and DR market analysis for business model fit and identification of potential high value markets through the creation of UMOI index.  Analysis of smart home market and specifically the energy management segment.  Foundational approach to the technology assessment to be provided during the project with identification of main competitors for different KERs as well as a more detailed feature evaluation of competitors competing in the relevant utilities platform market.  SWOT of UtiltEE in relation to preliminary competitive assessments All current product markets and service markets towards which UtilitEE is aimed are experiencing exceptional levels of growth and are forecasted to continue over the coming years providing encouraging signals in terms of the actual commercial potential of developed exploitable assets in the project. Indeed, in terms of the smart home market, projected compound annual growth rates until 2020 are estimated at around 25% with all ancillary hardware and software markets growing at equivalently impressive rates. Nevertheless, considering the fact that many of these markets are at preliminary phases of development and that product life cycles are still at the growth stage, the possibility of entering the said markets are higher but once entered competition levels will be extremely high. Currently from a product and service perspective and observing the prevalent players in the market, UtilitEE aims to differentiate itself through increased data granularity and focus on behavioral variables on top of which automation and explicit DR activities can be more seamlessly implemented than current practices.

6.2 Future needed developments

The next steps to be pursued in order to comply with the goals established in the Work Package 6 are reflected in the section where the Task methodology is detailed. The next phase of these activities will focus on extending the work performed on technology assessments with the identification of more or new competitors and more importantly a clear identification of key market attributes, the creation of a scoring/grading key for each of these attributes in order to

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D6.3 UtilitEE Market Report – First Version position competitors and UtilitEE in relation to these and finally the creation of a competitive mapping resulting from the grading process. This will enable a clearer and more characterized definition of competitive advantages and potential drawbacks of UtilitEE which will then be addressed in the way the technology is taken to market.

Moreover, in terms of market analysis, the next iteration of this document will provide a stakeholder analysis with relation to the solutions being offered. What is meant by this is a clear characterization of end user and customer preferences and needs in terms of product features and prices within markets of relevance for UtiltEE. For instance, it will be necessary to determine if UtilitEE is a product that is more adapted towards the needs of large utilities/energy retailers or smaller niche retailers and at what price would these players be ready to implement/use the technology (reservation prices).

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7 References

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[10] Kailas, Aravind, et al. “A Survey of Communications and Networking Technologies for

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[20] Energy Service Companies in the EU, Status review and recommendations for further

market development with a focus on Energy Performance Contracting. BOZA-KISS, Benigna

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8 Annex

8.1 SEDC Grading system:

Countries are graded according to the 4 standards established in the previous paragraph with the addition of a global score.

1. Demand Response access to markets

This criteria refers to the extent to which using demand flexibility as a resource is common practice in the different electricity markets such as balancing markets and wholesale markets.

Grade Demand Response Access to markets 4 Aggregated load is accepted in a range of markets 3 Aggregated load is limited to a number of markets 2 Aggregated load is accepted only in one or two programmes 1 Load is not accepted as a resource in any market Table 23 DR Access to market grading criteria [7]

2. Service Providers access to markets

Definition of roles and responsibilities of all relevant stakeholders particularly with the integration of independent aggregators within the markets alongside BRPs and retailers with no need for bilateral consent or agreements allowing for direct access of consumers to independent service providers.

Grade Service Providers Access to markets Standardised arrangements between involved parties are in place for all markets – 4 aggregators do not depend on prior consent of the retailer/BRP Independent third parties may access some parts of the market without consent of 3 retailer/BRP Lack of standardised arrangements between involved parties and aggregators must contract 2 with retailer/BRP to access market. 1 No standardised arrangement between involved parties is in place and aggregation is illegal Table 24 Service Providers access to market grading criteria [7]

3. Product requirements

This refers to the configurations and processes in place in the market (types of bids, duration…) and whether or not these are conducive towards the implementation of demand response.

Grade Product Requirements Programme requirements enable a range of resources (supply and demand) to participate in 4 multiple markets.

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Minor barriers to demand-side participation in market remain, however participation is still 3 possible Significant barriers remain, creating major competition issues for demand-side resource 2 participation 1 Programme requirements block demand-side participation Table 25 Product Requirements grading criteria [7]

4. Measurement and verification, payments and penalties

This criteria refers to how demand response should be measured and according to which baseline methodologies. What is also investigated in this instance is whether the established measuring criteria is fair for small consumers and whether or not the payments are enough to cover the cost of measurement and verification.

Grade Measurement and verification, payments and penalties Requirements are well defined, standardised, proportionate to customer capabilities, dealt 4 with at the aggregated level, and Payment is fair and penalties are reasonable Requirements are under development, but do not act as a significant barrier; Payment is 3 adequate, but unequal per MW between supply and demand; Penalty structures create risk issues for service providers, but participation is still possible Requirements act as a significant barrier to consumer participation; Payment structures seem 2 inadequate, unequal pay per MW between supply and demand, penalty structures create high risk issues There are no measurement and verification rules for Demand Response participation; 1 Payment structure inadequate and non-transparent; penalty structures act as a critical barrier Table 26 M&V grading criteria [7]

5. Overall Grading

Summarizes results in the four criteria. Results in this section are relative meaning obtaining the best grade possible does not necessarily mean that the market is fully open and operational.

Grade Relative status of demand response Commercially Active Partial Opening Preliminary Development Closed Table 27 Overall grading criteria [7]

8.2 ESCO market attractiveness rating system

The assessment of the ESCO market at member state level will be performed Gr using the preceding values applying the following grading system (see below ad

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ESCO market value (market value in millions €/year) Grade Large (x≥400) 4 Medium (400>x≥100) 3 Small (100>x≥20) 2 Minor (20>x) 1 Table 29 ESCO market value grading system

In order to obtain an overall score, both grades are averaged with equal weights yielding a score of overall market attractiveness ranked as shown in the following table (intervals correspond to obtainable scores):

Overall Market ESCO attractiveness Grade Highly attractive 4≥x>3 attractive 3≥x>2 Secondary 2≥x>1 Minor x=1 Table 30 Overall ESCO market attractiveness

In the case where an indicator was not available (written as n/a in the table above) the score was calculated solely on the basis of the indicator that was available.

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